This Brokerage Firm Sees A 41% Upside In This Stock

Brokerage firm, Motilal Oswal sees an upside of 41 per cent in the stock of ICICI Bank, with a price target of Rs 475. The stock of ICICI Bank is currently trading at Rs 327.

In its latest report, post the Bank's earnings, the brokerage firm has noted, that the bank has created higher than the required provisions towards Covid 19, which impacted earnings.

"On the other hand, operating performance remains strong, supported by robust net interest income at 17% year-on-year, despite higher tax refunds in 4QFY19. On the asset quality front, slippages remain elevated, led by one healthcare and one oil trading account, although higher writeoffs have led to gross non performance improvement.

Thirty per cent of the loan book has availed moratorium, with a higher incidence of the CV, 2-Wheeler, and Rural portfolios.

"We cut our FY21/22 PAT estimate by 8%/3% as we factor in higher credit cost and moderation in fee growth. Maintain Buy," the brokerage firm has said.

Quick highlights from the report are as follows:

COVID-19 provisions drag down earnings, Slippages stand elevated due to select corporate accounts

PAT grew 26% year-on-year to Rs 12.2b (71% QoQ decline; MOSLe: Rs 26.7b), affected by higher provisions (Rs 59.7b), as the bank made COVID-19 provisions of INR27.25b, higher than the requirement as per RBI guidelines.

NII grew 17% YoY to Rs 89.3b, led by 16% YoY growth in retail loans and 10 basis points. QoQ expansion in margins to 3.87%.

Other income rose 18% YoY, with core fees growing 13% YoY to Rs 36b (retail forms 75% of the total fees).

Advances grew 10% YoY, with the domestic book growing at 13% YoY (16% YoY growth in retail), while the overseas loan mix declined to 8.4%.

The average current accounts, savings account mix stood at 42.3% v/s 42.8% in 3QFY20.