Despite headwinds in FY23 due to interest rate hike cycle by RBI, ICICI Bank has managed to sail through the fiscal with strong growth. (Prashanth Vishwanathan/Bloomberg News)

One of the biggest lenders in the private sector, ICICI Bank, will be in the spotlight on Monday’s trading session as its stock price responds for the first time to the Q4 earnings for the fiscal year FY23. By outperforming Street forecasts on all fronts in Q4FY23, this lender provided enough evidence for analysts to remain upbeat about its future possibilities for growth. In the banking industry overall for FY23, ICICI Bank has been a standout performance, and Q4 was no exception.

“ICICI Bank reported an excellent performance in Q4FY23 across all the key parameters, exceeding market expectations,” stated Manish Chowdhury, Head of Research at Stoxbox.

In Q4FY23, ICICI’s net profit increased by 30% YoY to $9,122 crore, and its net interest income increased by a staggering 40.2% YoY to 17,667 crore. In Q4, net interest margin increased significantly to 4.9%.

NII was a small miss at Rs176.6 billion (PLe Rs179.6 billion), expanding by 10.9% QoQ/32.6% YoY, according to Gaurav Jani, Research Analyst at Prabhudas Lilladher Pvt Ltd. Though yields were higher than anticipated at 9.33% (PLe 9.07%), NIM (calc.) was a beat at 5.31% (PLe 5.21%), +24bps QoQ.

The bank’s provisions increased by 51.5% YoY to $1,619.8 crore, although its gross nonperforming assets decreased by 2.81% as opposed to 3.07% in the December 2022 quarter. Additionally, the net NPA ratio decreased from 0.55% in the previous quarter to 0.48% in Q4FY23. Provisions dropped noticeably by 28.3% QoQ.

“Provisions declined significantly and stood at Rs. 1,619.8 crore, down 28.3% QoQ/up 51.5% YoY,” Chowdhury stated in reference to provisions. It contained a prudently made contingency provision of 1,600.0 crores. The bank should be commended for managing to achieve declining provisions while changing its NPA provisioning standards to be more conservative.

Jani added, “Asset quality was higher and QoQ improved. Due to increased PCR, NNPA was 7bps lower at 0.5% while GNPA was better at 2.86% (PLe 3.03%). Gross slippages decreased to Rs43 billion (PLE Rs56 billion), while recoveries improved to Rs42.8 billion (PLE Rs40 billion). Write-offs were kept to a minimum of Rs. 11 billion.

The bank reported growth in the retail loan portfolio of 22.7% YoY and 5.4% QoQ. In Q4FY23, overall advances increased by a whopping 18.7% YoY to $1,019,638 crore. To $1,180,841 crore, total deposits increased 10.9% year over year.

The board of ICICI Bank has also recommended a dividend of $8 per equity share, which is excellent news for investors.

Additionally, the bank intends to issue debt securities, such as nonconvertible debentures, in domestic markets up to a total ceiling of 25,000 crore in order to raise money. Additionally, the bank hopes to raise up to $1.50 billion through the sale of bonds, notes, and offshore certificates of deposit in foreign markets.

According to Jani, the stock of ICICI Bank is trading at a P/core ABV of 2.6x/2.3x FY24/FY25E ABV.

Ahead of its Q4 earnings last week on Friday, ICICI Bank’s share price closed at $884.20 per unit, down by 1.13% on the BSE. Its market capitalization exceeds 6.17 lakh crore. The stock has increased on the exchange by around 16% year over year.

The second-largest private sector bank in India, according to Chowdhary, “justified its position after posting fantastic results in Q4FY23 that were above and beyond street expectations. outstanding profitability results from ICICI Bank were produced, and the bank’s outstanding asset quality demonstrated its ability to compete well.

Read More : Reliance Industries Q4 Preview: Expected Decrease in Net Profit, Increase in Ebitda

Chowdhary continued,

“ICICI managed to sail through it and has been reflected in the bank’s NIM which exhibited an upward trend in FY23, despite the headwinds for the bank over the past few quarters caused by the RBI’s regular interest rate hikes. It is noteworthy that the bank’s NIM improved, largely as a result of growth in the retail loan portfolio, which accounts for 54.7% of the total loan book and increased by 5.4% sequentially and 22.7% annually.

The management is convinced that ICICI Bank’s strategic focus on implementing digitalisation in the system will assist it to grow the business and provide end-to-end solutions to its clients, Chowdhary said. In our opinion, the company is well-positioned to beat its banking industry competitors going forward.

Disclaimer: The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before taking any investment decisions.

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