ICICI Bank shares rally 6% after 4th quarter results; Should you buy, sell or hold?

ICICI Bank share price jumped over 6 percent in early trade on Monday after the private lender reported a massive 260.5 percent year-on-year (YoY) growth in standalone profit at Rs 4,402.61 crore for the fourth quarter of fiscal 2021. The bank's profit in the corresponding period of last year stood at Rs 1,221.4 crore.

ICICI Bank's fourth-quarter results showed its net interest income (NII) in Q4FY21 grew by 16.9 percent to Rs 10,431.13 crore from Rs 8,926.9 crore, YoY. Its net interest margin (NIM) at 3.84 percent expanded sequentially but contracted marginally on a YoY basis from 3.87 percent.

During Q4FY21, ICICI Bank said it utilised contingency provision amounting to Rs 3,509 crore towards proforma NPAs as of December 2020, as these loans have now been classified as per the RBI guidelines.

On the asset quality front, the net NPA ratio declined to 1.14 percent from 1.26 percent (on a proforma basis at December 2020.)

ICICI Bank delivered strong 4QFY21 results with a big core PPOP beat (+22 percent YoY) and slippage at 0.75 percent of loans (better than expected). The key positive was the strong pick up in domestic loan growth (+18 percent YoY) which looks sustainable.

We further increase our earnings by 4%-6 percent factoring-in better growth and NII. With an end to the past 5-6-year intense corporate credit cycle, its improving granularity of earnings and potentially ICICI Bank being the new growth leader among large banks, we expect its rerating cycle to continue.

CLSA increased its target price to Rs 825 per share from Rs 800 earlier. ICICI Bank and Axis Bank remain CLSA's top sector picks.

We maintain our EPS estimates almost unchanged. We expect FY21-24F EPS/adjusted BV CAGR at 26 percent/15 percent. Our new TP of Rs 690 includes the standalone bank at Rs 555 (2.4x P/B), and contributions of life Insurance at Rs 60, general Insurance Rs 44, asset Management Rs 27, securities Rs 17 and balance Rs 18, with a 20 percent holding company discount. Risk: flare-up in credit cost, weaker loan growth.​

ICICI Bank’s profit for 4QFY21 was below estimate as buffer provisions and lower treasury offset a healthy operating profit growth of 21 percent. We are encouraged to see 20 percent YoY growth in retail loans. We tweak earnings and see ROE rising to 14-15 percent.

ICICI stays among Jefferies' top sector picks.

The FY21 saw strong PPoP and resilient asset quality despite COVID-19. The second COVID wave appears to be manageable. The earnings estimates remain unchanged as we build offset from high excess provisions.

Morgan Stanley maintained an overweight rating with a target price of Rs 850 per share.

The capital levels are strong with growth picking up and healthy pre-provision profitability. The brokerage increased EPS estimate by 2-3 percent on stronger growth and net interest margin.

It maintained an outperform rating and raised the target price to Rs 660 per share.

ICICI Bank reported a strong quarter, led by healthy business performance across all business segments. Strong operating performance was aided by healthy NII growth (17bp NIM expansion), though weak other income affected net earnings.

The bank has delivered double-digit RoE (~12.6 percent) for the first time post FY17 and we expect RoA/RoE to improve to 1.7 percent/15.2 percent in FY23E.

Motilal Oswal maintained a Buy call with a target price of Rs 750 per share.

The resilient portfolio performance reflects robust underwriting and portfolio selection; along with a strong balance sheet (comforting capital, NPL coverage and additional buffer) should assuage concerns on the impact of the second pandemic wave.

We estimate material RoA expansion over FY21-24 and a 20 percent+ earnings CAGR. The brokerage retains a Buy call with a target price of Rs 675 per share.

AT 10:05 am, the shares of ICICI Bank traded 5.08 percent higher at Rs 599.00 apiece on the BSE.