ICICI Bank's stock rallies toward a record as decline in net interest margin is seen 'nearing its end'

By Tomi Kilgore

India-based bank's stock wipes away the weakness seen after disappointing NIM results from rival HDFC Bank last week

Shares of ICICI Bank Ltd. rallied into record territory Monday as investors cheered the India-based bank's fiscal third-quarter results, which showed that the compression in net interest margin was nearing its end.

The results were a relief, because disappointing NIM results from rival HDFC Bank Ltd. (HDB) (IN:500180) weighed on ICICI's stock (IBN) (IN:532174) last week.

ICICI's U.S.-listed stock surged 4% in morning trading to trade above the current record closing price of $24.69, reached on Dec. 13.

ICICI reported over the weekend that NIM for the quarter to Dec. 31 was 4.43%, down from 4.53% in the previous quarter and below the 4.65% reported in the same period a year ago.

J.P. Morgan analyst Saurabh Kumar was encouraged by the results, saying that the NIM decline was "along expected lines." He reiterated the stock's overweight rating and lifted his stock-price target to INR1,180 (equivalent to $14.20) from INR1,150 ($13.84), with the new target implying 17% upside from the latest prices.

The bank also reported third-quarter profit, total revenue and net interest income that rose above expectations, according to FactSet.

And deposits as of Dec. 31 were up 2.9% from the end of the sequential second quarter and up 18.7% from a year ago, while the overall loan portfolio increased 3.9% sequentially and jumped 18.5% on the year.

Bernstein's Pranav Gundlapalle said the results were "steady and healthy" and reflected continued strength in loan growth and return on assets, and only "slight" margin compression.

He said the results indicate that NIM compression is "nearing its end," with fiscal 2024 NIM now expected to be at a similar level to that of fiscal 2023.

"Overall, a healthy set of numbers with the key positive being a still healthy NIM (despite the sequential compression) and the continued high [return on assets]," Gundlapalle wrote in a note to clients.

He reiterated his market-perform rating and INR1,150 stock-price target.

ICICI's stock has climbed 11.6% over the past three months, while the iShares MSCI India exchange-traded fund INDA has hiked up 13.5% and the S&P 500 index SPX has run up 15.2%.

-Tomi Kilgore

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01-22-24 1020ET

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