ICICI Bank shares are at their highest compared to its peers and in its history
Business Business: ICICI Bank shares have delivered flat returns over the past one month. Kotak Institutional Equities, after interacting with investors of ICICI Bank Ltd, said there are concerns that the private lender will underperform when net interest margins (NIM) are declining. Such fears appear to be misplaced, at least for now, the brokerage said. Kotak said most of its interactions with various stakeholders of the bank suggest that underwriting should be able to meet the best-in-class standard. The brokerage has factored in higher credit costs, taking into account the high growth and nature of the loan mix. “We are at a point in the bank’s history where there is no evidence of the weak underwriting that has been associated with the bank in the past. In our view, this is probably the most important factor in maintaining its current premium to peers,” Kotak said.
ICICI Bank has a strong lead from credit mix in addition to a strong liability franchise. Kotak said the asset mix will probably see some softness towards lower yields, but it seems that this will be somewhat offset by better pricing from our channel checks. “At this point in time, the re-pricing of the liability side appears to be complete. Hence, outside of an aggressive rate-cutting cycle, there is room for improvement in our NIM estimates,” Kotak said. The brokerage maintained its ‘buy’ recommendation on the stock with a fair value of Rs 1,400. Kotak called ICICI Bank a top pick and a bet on the long-term opportunity in the financial services sector. It has valued the bank at 2.8 times book and 18 times June 2026 EPS for return on equity (RoE) at 15 per cent level. “We value the subsidiaries at Rs 200 per share. Our earnings estimates are quite conservative. We acknowledge that the investment rationale for maintaining a positive rating has been challenging. With the bank enjoying best-in-class multiples, the best outcome is a steady compounding as we do not have too many points to form a different view from the consensus view on the bank,” it said.
