ICICI Bank stock is on a high. Can it sustain the momentum?

ICICI Bank shareholders have perhaps never had it so good. The lender’s stock hit a record high of Rs 942 per share on Tuesday on the Bombay Stock Exchange. 

One of the key reasons behind the rally is the fact that bank delivered strong results for the second quarter ended September 2022. 

How did ICICI Bank’s results actually look like?

The private-sector lender reported a 37% year-on-year rise in net profit to Rs 7,557.8 crore for the quarter ended September 30. This exceeded Street expectations of around Rs 7,350-7,400 crore.

The lender’s net interest income during the quarter surged 26.5% on-year to Rs 14,786.8 crore, reflecting strong loan growth. Loans grew at the rate of nearly 23% on a year-on-year basis, the best rate of growth in 24 quarters.

The bank’s asset quality improved as gross bad loans and net bad loans fell to their lowest levels in nearly eight years. The gross non-performing assets ratio came in at 3.19% for the quarter as against 3.4% in the previous quarter.

The lender’s net interest margin surged to 4.3%, a record high and more than nearest rival HDFC Bank's margin.

How has ICICI Bank done vis-a-vis the benchmark Sensex over the past few quarters?

ICICI Bank shares outperformed by gaining more than 24% in the last six months as compared to about 6% rise in benchmark BSE Sensex during the period.

How far can ICICI Bank go from here on?

Most brokerages have a ‘buy’ call on the counter and see the share price topping the Rs 1,140 mark from here on. 

Analysts say ICICI Bank reported strong Q2 results thanks to robust credit growth, multi-quarter high margins and lower credit cost. Credit growth was 22.7% year on year while asset quality improved.

A Mint report cited a brokerage as saying that the bank can continue to deliver on loan growth and net interest margin expansion even on a high base. 

The banks NIM expanded 30 basis points quarter on quarter, in line with industry trends. Asset quality improved with negligible net slippages and reduction in restructured loans.

Nuvama Wealth Management, which is majority-owned by Asian private equity firm PAG, said in a note that ICICI Bank's NIM was the highest in a decade and return on asset was the second highest since 2007.

Singapore-headquartered PhillipCapital marginally raised its price target on the stock following the September quarter results while retaining its ‘buy’ call.