Steady performer with improving asset quality
▪ Steady credit growth at 13% YoY, largely led by the Business Banking segment. Higher NIMs and lower provisions aided PAT
▪ Asset quality improved on a sequential basis, supported by lower slippages and higher sale of NPAs
▪ Maintain BUY. Raise SOTP-based TP to Rs 1,620 (from Rs 1,415), set at 2.8x FY27E ABV
Steady performance: ICICIBC witnessed steady credit growth of 13% YoY (+2% QoQ), largely led by Business Banking (+6% QoQ) growth in FY25. Growth in business banking was mainly driven by investments in credit systems and digital offerings. Further, retail book grew by 9% YoY (+2% QoQ) and accounted for 53.5% of net advances as of FY25 (55.6% as of FY24). We expect loans to grow at ~15% CAGR in FY25-FY28E. Deposits grew 14% YoY (+6% QoQ) mainly driven by growth in TDs (+15% YoY; +4% QoQ) CASA deposits grew by 13% YoY and 9% QoQ, leading to CASA ratio of 41.8% (-0.3% YoY; +1.3% QoQ).
NIMs improved sequentially: NIMs improved by 16bps QoQ to 4.41% in Q4FY25. The improvement was mainly driven by a rise in lending yields by 21bps QoQ due to lower interest reversal on Kisan Credit Card (KCC), coupled with 2bps impact of interest on income tax refund. With the onset of repo rate cut, NIMs are likely to be impacted in the near term, but will largely remain in a narrow range. Other income up 29% YoY on higher treasury (gain of Rs 2.4bn vs a loss of Rs 2.8bn in Q4).
Asset quality improved: GNPA ratio declined by 29bps QoQ to 1.67% in Q4 FY25. GNPA improvement was mainly driven by: a) lower slippages of Rs51.4bn or slippage ratio of 1.7% in Q4 FY25 from Rs60.9bn or 2.1% in Q3 FY25 b) higher sale of NPAs of Rs27.9bn in Q4 FY25 vs Rs 0.6bn in Q3 FY25. PCR declined 1.9% QoQ to 76.9%, while NNPA improved marginally 3bps QoQ to 0.39%. Further, credit cost improved to 27bps in Q4 FY25 vs 38bps in Q3 FY25, mainly driven by write-back on portfolio sales coupled with lower KCC provisions.
Lower credit cost aided PAT: Provisions came in lower at Rs 8.9bn vs our estimate of Rs 11.7bn for Q4 FY2025. This largely led to higher PAT vs our estimates.
Maintain BUY: ICICIBC is well on track for robust performance, driven by healthy credit growth, stable credit costs and a sustainable business model. RoA is likely to be in the 2.3-2.4% range and RoE 16.7-17.8% in FY25-FY28E. Given ICICIBC’s improved performance, we raise our SOTP-based TP to Rs 1,620 from Rs 1,415 set at 2.8x FY27E ABV.
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