ICICI Bank - Focus On Micro Market, Ecosystem Strategy For Deposits Growth: Nirmal Bang

Nirmal Bang Report

We met the management of ICICI Bank Ltd. Following are the key takeaways of the meeting:

1. The bank is following micro markets and ecosystem strategies for deposit mobilization. Within the micro market-based strategy, it provides localized solutions to customers as per their requirements while in the eco system-based approach, the bank aims at capturing the entire value chain of customers across the transaction cycle which includes customers, employees, vendors as well as dealers.

2. For branch additions, it has adopted a bottoms up approach.

3. Focusing on increasing deposits market share in lesser penetrated geographies / customer segments.

4. The bank has re-engineered its SME lending processes which has resulted in a decrease in TAT to seven days.

5. It has stayed away from rate competition in mortgages and the corporate segment and maintained pricing discipline.

6. In the past three years, the bank has strengthened underwriting and provisioning policies in unsecured loans.

7. Due to ~50% repo rate linked loans, we expect NIMs to get impacted in a rate cut cycle. This, coupled with upward normalization in credit costs, is expected to lead to a moderation in RoA to 2.2% over FY24-FY27E.

We have valued ICICI Bank at 2.9 times Sept 2026E adjusted book value (as against 2.8 times June 2026E ABV earlier), which results in a standalone value per share of Rs 1,351. Adding subs. value per share of Rs 193, we derive a target price of Rs 1,544 (versus Rs 1,450 earlier).

Our target multiple is at an 11.1% premium to the past five-year average multiple of 2.6 times, which adequately captures a double-digit earnings CAGR of 12.6% over FY24-FY27E.

Earnings will be driven by loan CAGR of 15.5%, NIM of 4.3%, improvement in opex ratios and average credit cost of 57 bps, thereby leading to average RoA of 2.2% during FY24- FY27E. Maintain ‘Buy’

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