ICICI Bank Rises To New High As Jefferies Retains Stock As Top Pick
The bank's corporate book can see further recoveries as sectors like power and chemicals will keep on improving in FY25, Jefferies says.
Shares of ICICI Bank Ltd. hit an all-time high for the second consecutive day on Wednesday after Jefferies India Pvt. kept the stock as top pick in the private lending space, highlighting its "healthy" deposit growth and operating expenditure.
ICICI Bank's market cap grew by Rs 1,683.6 crore to Rs 8.42 lakh crore as of 10:21 a.m.
Jefferies retained a 'buy' on the stock and kept the target price unchanged at Rs 1,350 apiece, implying a potential upside of 15% from the previous close. Focus on micro markets with right products, appointing senior people at branches coupled with expansion, and leveraging corporate client base helped the deposits growth, according to a note dated June 25.
Jefferies estimates a compound annual growth rate of 17% in deposits for ICICI Bank over financial year 2024–27 to aid similar growth in loans. The bank has a loan-to-deposit ratio of 84%, which is the lowest among other players in the sector. Its operating expenditure slowed to 13% in the fourth quarter of the last fiscal.
The private sector bank has been ahead on moderating staff additions and attrition rates, which helped in bringing down operating expenses. The effect will continue in the current fiscal as well, according to the brokerage.
The brokerage estimated a 14% growth in operating profit over fiscal 2025–26, while forecasting a 30-basis-point compression in the net interest margin during fiscal 2024–26. Low operating expenses will aid in reporting healthy earnings in fiscal 2025–26 despite the normalisation in the NIMs and credit costs, it said.
Credit costs can normalise towards 0.6–0.7% of loans over fiscal 2025–27. Corporate book of the private lender can see further recoveries as sectors like power and chemicals will keep on improving in the current fiscal as well, it said.
Key Takeaways From Jefferies' Note
Deposit growth of 20% among the best of large banks.
Slower cost growth to offset margin normalisation.
Asset quality holding up, corporate book could see recoveries.
Expects 18% return on equity to sustain.
Valuations based on SOTP valuations, which includes 2.4 times June 2026 price to book ratio.
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ICICI Bank's stock rose 1.67% during the day to Rs 1,218 on the NSE. It pared gains to trade 0.17% higher at Rs 1,200 per share, compared to a 0.11% advance in the benchmark Nifty at 10:21 a.m.
The share price has gained 29.09% in the last 12 months and 20.03% on a year-to-date basis. Total traded volume so far in the day stood at 0.18 times its 30-day average. The relative strength index was at 67.88.
Out of 51 analysts tracking the company, 47 maintain a 'buy' rating, and four recommend a 'hold,', according to Bloomberg data. The average 12-month consensus price target implies an upside of 10.1%.
