ICICI Bank Analysist Report 2022

Analyst Day 2022 – Going from strength to strength

ICICI Bank’s Analyst Day highlighted the bank’s unwavering focus on risk-calibrated core

operating profit across the segments. The bank has embraced ‘Customer 360’ model

wherein it has evolved from a product centric bank to a customer centric franchise, thus

taking entire bank to the customers for a gamut of offerings through seamless means. The

bank has key pillars of its strategy execution: i) Micromarket Approach, ii) Ecosystem

Coverage, iii) Digital as force multiplier. Management ensured customer should not be

impacted due to attrition, thus underscoring the resilience of functionalities and processes. It

also asserted the vitality of partnerships (including startups) where players are aligned with

the bank’s digital roadmap across lending, payments, risk management and customer

experience; case in point is Amazon Pay credit card which has excelled credit card industry on

key metrics. Similarly, strong partnerships with corporates resulted in ICICI Bank’s salary

account market share of 19% (among top-3). Currently, ICICI Bank has technology spending

of ~9% of income (vs. 6% in FY20) and will keep it elevated around these levels going

forward. This is in-line with leading global banks, hence the lender remains at the forefront

of technological prowess. Furthermore, the bank also demonstrated such digital capabilities

through live CBDC (Central Bank Digital Currency) payment transactions and its preparations

to setup virtual branches on Meta platform, once it scales-up.

We reckon ICICI Bank has embedded digital capabilities which not only resulted in enriching

user experience but also opens up plethora of offerings to customers across consumption,

retirement planning, savings, wealth creation, asset creation and risk coverage, hence

accelerating the cross-sell engine. We like management’s consistent focus on risk-adjusted

core PPOP, capturing the maximum value in the customer ecosystem while keeping asset

quality under check. We maintain our positive stance in light of: i) highly efficient large

liability franchise, ii) robust capital ratios, iii) strong PCR and steady asset quality and iv)

strong return profile and superior digital prowess. Maintain BUY with SoTP-based target price

of INR 1,025 (values the core business at 2.8x FY24E P/BV).

Multiple vectors to deliver risk-calibrated core operating profit: The management

highlighted the bank’s unwavering focus on risk-calibrated core operating profit across
the segments. The aim is to attain it by leveraging multiple vectors: i) increasing Net

Interest Income (NII) & Fee through investment in vibrant ecosystems, deepening

relationships with existing customers and widening pre-approved base. ii) reducing Cost

of Acquisition by means of increased Direct-to-Customer, digital onboarding journeys,

single limit per customer and empowered distribution. iii) rationalising operating

expenses by developing efficiencies through synergies, de-congestion & simplification

and self-service enablement. iv) improving portfolio quality through stringent

counterparty selection, risk-based pricing framework and AI enabled collection models.

Management also emphasized the importance of good quality liabilities which would

shape-up good quality assets and fees. This cognizance of strong liability franchise

resulted in healthy growth of average CA and SA balances by 15.5% and 16% YoY,

respectively, in 2QFY23 (avg. CASA ratio stood at 45%) – in a challenging environment