Is ICICI Bank The Next HDFC Bank? This Mumbai-Based Bank Tops UBS To Become 18th Largest Bank; BUY Stock?

Mumbai-based multinational bank, ICICI Bank Limited has created a new history by becoming the 18th largest bank in the world, toppling Switzerland's UBS Group AG. Regarding market capitalisation, ICICI Bank is now at the 18th rank with an M-cap of $101.41 billion.

On the other hand, UBS is now in the 20th position with an M-cap of $95.64 billion. The 19th spot is held by Toronto Dominion Bank with an M-cap of $96.35 billion. Not too far, India's largest public sector lender, State Bank of India (SBI) is at 21st rank with an m-cap of $90.14 billion.

Currently, the largest bank in the world title is held by JP Morgan Chase with an M-cap of $571.27 billion. Meanwhile, HDFC Bank is the largest bank in India and the eighth largest in the world with an M-cap of $164.94 billion.

The gap between HDFC Bank and ICICI Bank is $63.58 billion. However, HDFC Bank has lost more valuation in 2024 so far, than compared to ICICI Bank which makes us wonder, is ICICI Bank the next top bank from India? In India, ICICI Bank is the second largest lender.

YTD, HDFC Bank surged by merely 0.60%, while ICICI Bank stock has zoomed by 20% on BSE.

ICICI Bank has been on a winning streak for six consecutive trading sessions. Brokerage Motilal Oswal is the latest to like the bank, and the outlook is robust.

Brokerage Motilal Oswal met with the top management team of ICICI Bank (ICICIBC), represented by Mr. Sandeep Bakhshi, MD & CEO, Mr. Abhinek Bhargava, Head-IR, and select business heads to discuss the bank's business outlook and other key focus areas.

Key takeaways from the meet, as per Motilal Oswal are:

1. The bank remains agnostic to sectors and continues to focus on risk-calibrated core PPoP, the burgeoning pace of activity in SME, business banking and retail will continue to drive overall growth. The bank will continue to tighten its underwriting in unsecured lending, thereby supporting sustained growth and portfolio quality.

2. The bank is also focusing on a 360-degree customer-centric approach by providing various products and solutions for a holistic banking experience, thus improving its customer acquisition run rate and overall engagement levels. ICICI Bank's delivered industry-leading deposit growth of ~20% in FY24.

3. The bank remains focused on bolstering its retail deposit base even as the CASA mix moderated to 42.2% in FY24 (~39% on average basis) owing to a higher rate differential. The management intends to maintain a healthy and stable deposit profile to keep funding cost in control. The conservative LDR of 82.3% on domestic book places the bank well among large private banks to pursue loan growth.

ICICI Bank expects margins to remain range-bound with a slight downside bias in the near term due to elevated TD rates (recently raised rates by 10bp) and residual repricing of its TD portfolio.

4. The bank is focusing strongly on leveraging technology to increase volumes in the retail and SME segments, with an aim to improve productivity and ensuring that it gets its due "Return on Effort." The brokerage currently factors in ~15% YoY growth in opex over FY24-26E and remain optimistic on further moderation in the opex run rate.

5. The management's unwavering focus on fostering a cohesive organizational culture underpins its goal of sustainable and profitable growth, reinforcing the bank's position as a resilient and successful institution poised for continued success in the banking sector.

6. The bank has made aggressive investments in technology, wherein it has used analytics and digital capabilities to formulate early delinquency models, which is helping the bank keep slippages under control. The brokerage estimates GNPA/NNPA ratios to moderate to 2.17%/0.28% by FY26E, while credit cost increases to ~0.6% by FY26E.

On the valuation, Motilal Oswal said, "ICICIBC is well positioned to deliver a superior performance characterized by healthy loan growth, strong asset quality and industry-leading return ratios. While we estimate margins to remain range-bound in the near term, the operating leverage is emerging as a lever to support earnings growth."

Motilal's note added, "The bank is witnessing healthy deposit inflow, while a benign CD ratio (lowest among large private banks) places it well to focus on profitable growth. The asset quality outlook remains robust as the bank maintains strong PCR and a high contingency buffer (1.1% of loans). We thus estimate ICICIBC to deliver a PPoP/PATCAGR of 16.7%/13.7% over FY24-26E, leading to RoA/RoE of 2.2%/17.7%. Reiterate BUY with a TP of INR1,350 (premised on 2.5x FY26E ABV)."

Disclaimer: The recommendations made above are by market analysts and are not advised by either the author nor Greynium Information Technologies. The author, nor the brokerage firm nor Greynium would be liable for any losses caused as a result of decisions based on this write-up. Goodreturns.in advises users to consult with certified experts before making any investment decision.