ICICI Bank – Deception or Honest Manipulation?

ICICI Bank Limited is an Indian Private bank which has its headquarters in Mumbai. The bank provides a variety of banking products and multiple financial services for corporate and retail customers through their diverse delivery channels and specialized subsidiaries in the areas of investment banking, life, non-life insurance, venture capital and asset management.

Company’s Background

The abbreviation ICICI stands for Industrial Credit and Investment Corporation of India which was inaugurated on 5 January 1955. Sir Arcot Ramasamy Mudaliar was elected as the first ever Chairman of ICICI Ltd. The corporation was formed as a joint-venture with the World Bank, India’s public-sector banks and public-sector insurance companies to provide project financing to Indian industry. ICICI Bank was established by ICICI as a wholly owned subsidiary in 1994 in Vadodara. The parent company was later merged with the bank.

Quarterly growth

ICICI Bank reported their consolidated quarterly results for Q2 of the fiscal year 2022-23 at Rs 8,361 crore which is excellent growth of 27% comparing with Rs 6,571 crore reported in the same quarter of the last fiscal year. The financing profit of ICICI Bank is always negative as per the data given on Screener website which appears to be highly deceitful as the company adds to their profit through the means of Other Income. We cannot ascertain regarding the profits made by the bank out of the Other Income category.

ICICI Bank is India’s 2nd largest private sector lender, reported a colossal 37 percent year-on-year growth in standalone profit and a 26 percent growth in net interest income. Additionally, the bank reported a remarkable drop in bad loan provisions.

The bank said that its net interest income during the quarter has surged to Rs 14,800 crore, compared to Rs 11,700 crore in the same period of the previous fiscal year, with the net interest margin increasing by about 30 bps on sequential as well as on yearly basis.

The loan portfolio has grown by 23 percent year-on-year, with domestic loan portfolio growth at 24 percent. The total deposits have risen by 12 percent year-on-year to Rs 11 lakh crore in September FY23, with average current account and savings account (CASA) ratio of 45 percent for the quarter.

ICICI Bank has gained a 25 percent YoY growth in the retail loan portfolio which contributes to about 53 percent of the total loan book, and 44 percent growth YoY in the business banking portfolio.

ICICI Bank reported an enhancement in asset quality for the quarter with gross non-performing assets as a percentage of gross advances which have fallen by 22 bps QoQ to 3.19 percent, and net NPA fell by 9 bps sequentially to 0.61 percent.

The bank said that its assets have grown by 14 percent to Rs 18.33 lakh crore.

Trimming action by Mutual Fund Managers

The Indian mutual fund operators are recurrently trimming down its subjection to ICICI Bank which is regarded as one of the most bullish and highly profitable trades in the Indian stock market.

ICICI Bank which is the private sector lending giant has a buy rating from nearly 100 percent of the 54 analysts that track the stock currently, as per the data present on Bloomberg. The stock has been a rank outperformer, rising 20 percent in 2022 and over 100 percent in the past 3 years.

In 2021, ICICI Bank has taken the lead on HDFC Bank to become the most owned scrip of Indian mutual funds, which accounts for over 6 percent of the industry’s equity assets under management (AUM).

Over the past quarter, domestic mutual funds have net sold shares of ICICI Bank having their worth which is nearly Rs 2,400 crore, which can be interpreted that fund managers are congenial with booking their profits after getting in on the turnaround in the bank in early 2020.

The stake pruning by mutual funds could be an activity of short-term reallocation of portfolios, which is a common process for fund managers, considering the vigorous returns which ICICI Bank has been able to produce over the past 3 years.

Technical Analysis

ICICI Bank Weekly Candlestick Chart on Sharekhan’s TradeTiger

According to the retracement levels with respect to the crash of 2020, ICICI Bank is heading towards its 261.8% retracement level at Rs 1007.  The price is trading around Rs 930 as of November end. Hence the target of Rs 1007 is fairly achievable in the short-term considering the mutual fund operators are not consistent on dumping the stock as the valuations for ICICI Bank are already expensive. MFI is at 70 points which is a clear indication of the stock being overbought and is due for a correction.

The accord amongst the financial analysts is that ICICI Bank will arise as the top lender in both retail and corporate loan divisions, which will be supported by its investments in technology, improving underwriting standards, and improving margin profile.

Disclaimer: We do not endorse or encourage you to take trades or investment decisions based upon our posts/research, all of your trading and investment activities are your own and should be taken through consultation with reputed financial advisors. The analysis posted on this website has been created by involving multiple mediums which are present over the Internet.

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