This Private Sector Banking Stock Grew 200% In 5 Yrs, Brokerage Suggests Buy For Robust 36% Returns

IDBI Capital is optimistic about the leading large cap private sector bank, ICICI Bank in its recently published report, suggesting buy. The brokerage recommended investors buy the Bank's stock with a target price of Rs 1,260 per share. According to the given target price, if the stock is purchased at the current market price it could give gains of up to 36%.

The market capitalization of ICICI Bank is Rs 6,46,871 crore. ICICI Bank is a leading bank in India offering a diversified portfolio of financial products and services to retail, Small-medium enterprises (SME) and corporate customers. The Bank has an extensive network of ATMs, branches, and other touch-points spread across the country.

Stock Outlook & Returns

The current market price (CMP) of the ICICI Bank's stock on NSE stood at Rs 929.90 per share on Friday. The CMP is only 2.95% down from its recently recorded new 52-week high level, which is Rs 958.20. Its 52-week low is Rs 642.15 recorded on 7 March 2022.

In the past 1 month, it grew by 2.13%. whereas, in 3 months, it grew by 3.18%, respectively. In the past 1 year, the stock has given 23.17% positive returns. In the past 3 years, it gave 75.62% positive returns. Whereas, in the past 5 years, it has given 199.24% multibagger returns on investments.

360O Customer Journey

The Bank has been working towards improving the customer journey by making small changes in its process so as to make the entire customer experience more simplified and reduce the life cycle. Led by the principles of Customer Delight, Consistency Customer 360O approach, the bank is redefining the customer experience by focusing at unit as well as micro market level. The bank has adopted One App strategy whereby one single app is offered to all retail customers for the entire life cycle and same RM is assigned to all the members of a family. Not just for retail customers, the bank is also working towards improving the overall journey for the corporate segment of customer by launching new products and services such as Electronic Bank Guarantee, treasury management products (such as hedging exposures, RMs booking on behalf of customers) and many more to meet to emerging requirements of the corporate sector.

Go to Market Strategy

Under the go to market strategy, the business centers are taking the full bank to the customer so as drive deeper customer engagement, providing solutions to the customers across the spectrum of their needs. Based on the key pillar of micro market approach, ecosystem coverage and digital as force multiplier, the bank is adopting a balanced approach with focus on long term commitment and risk calibrated framework to maximize its core operating profit. In order to focus more on the high potential market, the bank has adopted the Zonal Head, Country Head and State Head approach. The bank has started appointing BM based on the geographical location of the area so that the BM are able to better understand the needs and requirements of particular locations and be in a best position to serve the customer. All this have resulted in changed roles of RMs and other employees to curators, facilitators, connectors as well as co-anchors.

Startup Engagements

The bank has been working towards driving their engagements with start-up ecosystem and has identified serves processes such as helping the startup with their FDI handling, inbound and outbound remittances. The bank is also collaborating with startups and co-creating innovative products which drive the digital transformation journey of the bank, in line with the banks digital road map. Key focus areas under the engagement includes payments, lending, customer experience, enablers as well as risk management. The bank has started the process and have partnered with various startups towards achieving is goals for improving the overall customer journey.

Bank to BankTech

The bank aims as becoming the most trusted bank in the country and in-line with the aspiration, rolling out the best in class process to meet the growth requirements of the customers which are then customized and digitized using technology enabling the bank to handle the large scale. The bank has created a position of Chief Data Officer for the same and has increased its technology spend as a percentage of opex to 9% (vs. 6% in FY20) and expects spend to remain at elevated levels in near future. With a conversion rate of around 80% from the recommendations of models generated using AI, the bank is creating deposit growth using AI by focusing on micro market segments and understanding opportunities for growth, thereby generating leads for sourcing of business. Further, the bank is also experiment the use of Meta Verse in banking and developed system architecture based on principals of agility, scale, security, resilience and continuous innovations. The bank is also working towards i-Mobile pay 3.0 which is expected to roll out next year.

Buy for a target price of Rs 1,260/share

IDBI Capital said, "We attended Analyst Day hosted by ICICI bank which highlighted that how the bank is leveraging on technology to drive the next leg of its growth opportunities. Driven by digitization and technological initiatives, the bank is working towards simplifying processes, customer journey and improving the customer experiences right from on boarding to servicing them, leading to reduced life cycle."
It added, "The bank aims at being the most trusted bank by adopting fair to customer and fair to bank approach across all its dealing with the customers. We have moved to FY25E estimates and reiterate 'BUY' with a new TP of Rs.1,260 (Rs.1,050), valuing parent business at Rs.1,133 at 2.6X P/ABV FY25E (as bank continue to sustain RoA at 2% with better asset quality) and rest for the subsidiaries."

Disclaimer

The stock has been picked from the brokerage report of IDBI Capital. Greynium Information Technologies, the Author, and the respective Brokerage house are not liable for any losses caused as a result of decisions based on the article. Goodreturns.in advises users to check with certified experts before making any investment decision.