Buy ICICI Bank stock, shares may rally over 25%, says Motilal Oswal;

ICICI Bank share price has been the best performer in the banking sector as it delivered 80 per cent, 42 per cent returns (YTD) over FY21 and FY22, respectively, according to Motilal Oswal Institutional Equities. The stock is likely to rally further on the back of strong industry position, robust digital expansion and steady asset quality. While the stock has corrected nearly 2% in the past five days, it has rallied over 13% in a month, and over 22.8% in the last six months. ICICI Bank share price has surged more than 230% in the last five years.

Motilal Oswal expects the private lender to deliver 18%/20% CAGR in loans/PPOP over FY22-24E. The brokerage firm maintained a ‘buy’ rating on the stock with a target price of Rs 1,100 per share. ICICI Bank shares on Wednesday were quoting at Rs 807.35 apiece, down 2.15% on BSE. The stock touched an intraday high of Rs 820 apiece and an intraday low of Rs 803 apiece. In the previous trading session, ICICI Bank shares closed down at Rs 823.35. The stock touched its 52-week high Rs 859.70 and 52-week low Rs 512.10 on 25 October and 28 January, 2021, respectively. Currently, it is trading 6% below its 52-week high.

ICICI bank: BUY
Target price: Rs 1,100

ICICI Bank’s market capitalization ranking within the BFSI space has improved to two from five in FY18, according to the Motilal Oswal report. Stability of the top management has helped improve the lender’s operational performance. Additionally, Sandeep Bakhshi’s appointment as CEO has also brought stability which enabled value creation and drove re-rating as the bank delivered 31 per cent CAGR in m-cap since FY18-21 v/s 7 per cent over FY10-18, it said.

“ICICI Bank has been reporting a robust performance, led by strong core PPOP, controlled provisions, and steady asset quality. A healthy mix of the high yielding portfolio (Retail/Business Banking) and a low cost liability franchise is aiding margin expansion. The bank is witnessing strong recovery across key segments such as Retail, SME, and Business Banking. We estimate ICICI Bank to deliver 20% CAGR in PPOP over FY22-24E, while RoA reaches the 2% milestone. It has a strong capitalization with a Tier I of 17.3%, which will support healthy loan growth. We reiterate ICICIBC as our top Buy in the sector with a TP of INR 1,100 (2.9x FY24E ABV for the core bank),” said analysts at Motilal Oswal Financial Services.

Growth trends getting broad-based

The lender has seen steady growth of 17% (CAGR) in its retail portfolio over the past three years which has enabled 12% growth in overall loans. With the mix of overseas books declining to 5% and the outlook on corporate loan growth improving, Motilal Oswal estimates ICICI Bank to deliver 18% CAGR in loan growth over the next two financial years. Separately, the…