ICICI Bank stock at record high; m-cap hits $100bn. What's behind the rise?

ICICI Bank share price news: On Wednesday, June 26, ICICI Bank shares hit a fresh record high for the third consecutive day, rising 2 per cent on the BSE in the intraday trade

ICICI Bank share price hits record high, ICICI Bank m-cap tops $100 billion: Shares of ICICI Bank have been on a steady uptrend, rising 30 per cent over the past one year; not far behind Axis Bank stock that surged over 34 per cent during the period. The BSE Sensex, meanwhile, is up 25 per cent, and the BSE BANKEX 22 per cent in the last one year, ACE Equity data shows.

On Wednesday, June 26, ICICI Bank shares hit a fresh record high for the third consecutive day, rising 2 per cent on the BSE in the intraday trade. On Tuesday, its market capitalisation (market-cap) had hit $100 billion-mark and surpassed UBS’ market-cap.

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The recent run-up, analysts said, was mostly a rerating of the stock on account of the lender's financials, which they say are 'best-in-class' among peers with room for growth. Management quality and budget sops for the 'middle class', they said, could keep the stock buoyant in the weeks ahead.

"During the March quarter of the financial year 2023-24 (Q4-FY24), ICICI Bank reported a credit-to-deposit ratio of 82.3 per cent (versus around 100-per cent for Axis, HDFC Bank). Besides, its margins have contracted less than most private lenders. Asset quality, too, has been healthy with no management-related issues. All these factors have led to the up move," said Anwin Aby George, research analyst tracking the banking sector at Geojit Financial Services.

ICICI Bank's profit after tax (PAT), meanwhile, grew by 17.4 per cent year-on-year (Y-o-Y) to Rs 10,708 crore in Q4-FY24. For the fiscal year 2023-24 (FY24), it reported a 28.2 per cent Y-o-Y growth in net profit to Rs 40,888 crore.

ICICI Bank's loan book stood at Rs 11.84 trillion at the end of the quarter, clocking a credit growth of 16.2 per cent Y-o-Y and 3 per cent Q-o-Q. Deposits grew 20 per cent Y-o-Y and 6 per cent Q-o-Q to Rs 14.12 trillion, while current account-savings account (CASA) ratio improved by 400 bps Q-o-Q to 42 per cent - unseen in peers.

Analysts believe the bank's strategic initiatives in digital banking and branch network expansion should help it sustain healthy momentum in liabilities going ahead.

'Competent Management'

According to a report by Motilal Oswal Financial Services, ICICI Bank has undergone a 'radical transformation' under Sandeep Bakhshi's leadership, marked by an emphasis on 'team performance'.

"The management's unwavering focus on fostering a cohesive organisational culture underpins its goal of sustainable and profitable growth, reinforcing the bank's position as a resilient and successful institution," the brokerage pointed out.

Budget boost?

Besides financials, Anwin George of Geojit Financial Services believes ICICI Bank's loan book may get a shot in the arm if the government announces sops for the middle and lower income strata in the upcoming Budget 2024.

ICICI Bank's retail loans stood at Rs 6.66 trillion at the end of the March quarter, accounting for around 55 per cent of the total loan book. Rural loan book was Rs 1.02 trillion (8.4 per cent share), followed by corporate loan book of Rs 93,228 crore (7.7 per cent share).

Valuation & strategy

According to analysts, the bank's current price-to-earnings (P/E) valuation of 19.9x (at the end of FY24) is at par with historical average. The stock, they said, is expected to outperform markets with intermittent corrections, if any, being bought into.

Analysts at Macquarie have raised their target price to Rs 1,300 (from Rs 1,190), aided by valuation comfort and expectations of private banks outperforming public peers over the next few years.

"We expect private sector banks to report healthy return on assets (RoAs) and return on equity (RoEs) over the next three years and maintain a steady power of compounding stories. We expect healthy RoEs in the 16-18 per cent range," the brokerage said in a recent report.