Headquartered in Mumbai, India, ICICI Bank Limited (IBN) offers a broad array of banking products and financial services worldwide. It operates in Retail Banking; Wholesale Banking; Treasury; Other Banking; Life Insurance; General Insurance; and Others segments. The company's shares are down 15.1% in price year-to-date and 21.5% over the past month, closing yesterday's trading session at $16.80.
IBN’s recent quarterly performance was impressive, thanks to a strong increase in demand for consumer loans. Growth in net interest income was a significant tailwind and is projected to enhance the company's financial success in the foreseeable future.
However, increased costs are expected to influence the bank's bottom line negatively.
Here is what could shape IBN's performance in the near term:
Mixed Financials
IBN's net interest income increased by 23% year-over-year to INR122.36 billion ($1.6 billion) for the third quarter, ended Dec. 31, 2021. Its non-interest revenue (excluding treasury income) grew 25% from the year-ago value to INR48.99 billion ($659 million). Its fee revenue climbed 19% to INR42.91 billion ($577 million), while its total deposits rose by 16% to INR10,174.67 billion ($136.9 billion). However, its operating expenditures increased by 22% to INR70.75 billion ($951.71 million). In addition, its provisions (excluding tax provisions) fell 27% from the prior-year quarter to INR20.07 billion ($270 million).
Premium Valuations
In terms of trailing-12-months non-GAAP P/E, the stock is currently trading at 19.22x, which is 72.1% higher than the 11.17x industry average. Also, its 2.57x forward Price/Book multiple is 129.9% higher than the 1.12x industry average Furthermore, IBN's 6.77x forward Price/Sales is 115.1% higher than the 3.15x industry average.
Mixed Profitability
IBN's $14.93 billion trailing-12-months cash from operations is 10439.6% higher than the $140.92 million industry average. However, IBN's 21.9% trailing-12-months net income margin is 28.2% lower than the 30.6% industry average. Also, its trailing-12-months ROA and CAPEX/Sales multiple are 1.2% and 0.91% lower than their respective industry averages.
POWR Ratings Reflect Uncertainty
IBN has an overall C rating, which equates to a Neutral in our proprietary POWR Ratings system. The POWR ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. IBN has an F grade for Value and a C for Quality. The stock's higher-than-industry valuation is in sync with the Value grade. In addition, the company's mixed profitability is consistent with the Quality grade.
Of the 96 stocks in the B-rated Foreign-Bank industry, IBN is ranked #63.
Beyond what I have stated above, one can view IBN ratings for Growth, Momentum, Stability, and Sentiment here.
Bottom Line
The company's shares are currently down 21.5% in price over the past month and are trading below its 50-day and 200-day moving averages of $20.44 and $19.31, respectively, indicating bearish sentiment. Furthermore, the broader market sell-off due to growing tensions in Ukraine has weighed on the price performance of banking stocks and could lead to its share price retreating further in the near term. Therefore, we believe investors should wait before investing in the stock.
How Does ICICI Bank Limited (IBN) Stack Up Against its Peers?
While IBN has an overall C rating, one might want to consider its industry peers, OFG Bancorp (OFG), Banco Bilbao Vizcaya Argentaria S.A (BBVA), and UBS Group AG (UBS), which have an overall B (Buy) rating.
IBN shares rose $0.60 (+3.57%) in premarket trading Wednesday. Year-to-date, IBN has declined -12.08%, versus a -10.83% rise in the benchmark S&P 500 index during the same period.
About the Author: Pragya Pandey
Pragya is an equity research analyst and financial journalist with a passion for investing. In college she majored in finance and is currently pursuing the CFA program and is a Level II candidate.
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