ICICI Bank Ltd. IBN remains well-poised for revenue growth on the back of strong loan balances, digitization efforts, high interest rates and low-cost deposits. However, an elevated expense base and weak asset quality remain headwinds.

IBN’s efforts to enhance its digital banking experience for its retail and corporate clients are encouraging. These enable the bank to provide seamless digital services, personalized offerings and value-added features in order to further its cross-sell and up-sell opportunities.

The rapid adoption of the company’s mobile banking app, iMobile Pay, has deepened market penetration. As of Mar 31, 2024, more than 10 million activations of iMobile Pay were carried out by non-ICICI Bank users. Moreover, the bank’s digital platform for businesses, such as InstaBIZ, alongside supply chain platforms, has experienced significant growth in the past few quarters. As of Mar 31, 2024, there were more than 3.5 million registrations by non-ICICI Bank account holders on InstaBIZ. These efforts are leading to a rapid enhancement in end-to-end digital sanctions and disbursements across numerous products.

ICICI Bank’s technological initiatives and digitization efforts have been contributing to its top-line expansion through non-interest income growth. In fiscal 2024, roughly 35% of the bank’s mortgage loan sanctions and 38% of its personal loan disbursements were end-to-end digital in terms of volume. These efforts continue to enhance non-interest income, with the metric witnessing 15% growth in fiscal 2024, following a 13% rise in fiscal 2023. Digitization efforts, along with rising mobile banking transactions, are likely to aid the company in boosting its non-interest income.

Despite ICICI Bank having a wide international loan coverage, its total loan portfolio primarily consists of domestic loans (97.2% as of Mar 31, 2024), thus mitigating geopolitical risks and concerns. Furthermore, the bank’s marketing efforts to boost its retail deposits in order to reduce its cost of funds and build a stable funding base keep it well-positioned to tackle the challenging rate environment. At the end of fiscal 2024, retail loans witnessed growth of 19% compared with a 23% rise in fiscal 2023.

ICICI Bank currently carries a Zacks Rank #3 (Hold). Over the past six months, shares of the company have rallied 20.4%, outperforming the industry’s growth of 18.8%.

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Nonetheless, ICICI Bank’s weak credit quality is worrisome due to a tough operating backdrop. As of Mar 31, 2024, its contingency provisions were INR131 billion ($1.6 billion). while its exposure to BB and below-rated borrowers, non-performing loans and unrated was 2% of total net advances as of the same date.

ICICI Bank’s escalating expense base remains another headwind. In fiscal 2024, 2023 and 2022, operating expenses grew 19%, 23%, and 24%, respectively, while the metric witnessed a marginal decline in fiscal 2021. The bank’s ongoing branch expansion efforts, alongside its technological initiatives, are likely to keep the expense base elevated. This will likely hinder bottom-line expansion.

Foreign Banking Stocks to Consider

Some better-ranked foreign banking stocks worth mentioning are Banco Macro S.A. BMA and Bancolombia S.A. CIB.

Estimates for Banco Macro’s earnings for the current year have been revised 35.3% upward in the past month. The company’s shares have jumped 230.9% over the past six months. At present, BMA sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Estimates for Bancolombia’s earnings for the current year have been revised marginally downward in the past week. The company’s shares have gained 28.9% over the past six months. At present, CIB carries a Zacks Rank #2 (Buy).

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ICICI Bank Limited (IBN) : Free Stock Analysis Report

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