Highest-rated banking stock ICICI's performance hasn't been stellar

ICICI Bank is the world’s highest-rated banking stock, but its performance hasn’t exactly been stellar.

The $32-billion lender has 56 ‘buy’ recommendations, and its consensus rating of 4.95 on a scale of 5 is the highest among the 50 largest banks globally, data compiled by Bloomberg show. Meanwhile its share price is down 32 per cent this year, ranking it in the bottom four of that same group.

Lockdowns and low interest rates have taken a toll on global financial stocks, and India’s banks are still reeling from a crisis among the nation’s smaller shadow lenders. Even so, attractive valuations and signs of demand picking up in villages should stand ICICI Bank’s shares in good stead, said Sanjiv Bhasin, executive vice-president at IIFL Securities.

 

 

“We are witnessing a strong monsoon rainfall, and the rural sector is doing very well,” Bhasin said. “The valuation of ICICI Bank gives a lot of comfort as it has been an underperformer.”
 

India’s second-largest public lender is trading at about 1.9 times book value, cheaper than the Nifty Bank Index’s 2.7 times. Its earnings have held up, with a 36 per cent rise in net income for the June quarter, helped by the sale of stakes in its insurance subsidiaries.

While the bank reported higher provisions against bad loans because of the pandemic, it plans to raise as much as Rs 150 billion through a share sale to institutions to boost its balance sheet. 

A number of peers have undertaken such financial buffer building this year, and passive flow is seen helping to support ICICI Bank’s stock.