On Wednesday, Axis Capital (NYSE:AXS) Limited adjusted its stance on ICICI Bank (ICICIBC:IN) (NYSE:IBN), shifting the rating from 'Buy' to 'Add,' while increasing the price target to INR 1,370 from INR 1,300. The adjustment reflects the bank's consistent earnings growth and solid profitability, which have propelled the stock to outperform its peers over the last six to twelve months.
ICICI Bank has exhibited a robust stock performance, with gains of 25% and 31% over the past six and twelve months respectively. This performance has outshone the Nifty 50's 13% and 26% increases in the same time frames, as well as the Nifty Bank's 11% and 17% gains. In response to the bank's financial results, Axis Capital Limited has raised its profit after tax (PAT) estimates for the fiscal years 2025 and 2026 by 2% and 3% respectively.
The upward revision in the bank's price target is based on a sum-of-the-parts (SoTP) valuation method, taking into account a forecasted decline in operating expenses. Despite the positive revision, the bank's anticipated return on assets (RoA) for fiscal years 2025 and 2026 is expected to be slightly lower than the 2.5% RoA projected for the fourth quarter of fiscal year 2025, due to a decrease in net interest margins (NIM).
At present, ICICI Bank's shares are trading at a multiple of 2.5 times the projected price to adjusted book (P/adj. B) value for the core bank in fiscal year 2026 and 14.7 times the price to earnings (P/E) ratio, based on a compound annual growth rate (CAGR) of 13% for earnings from fiscal years 2024 to 2026. The revised price target suggests a modest increase from current levels, prompting the change in investment rating to 'Add.'
In other recent news, ICICI Bank has reported a series of significant developments. The bank announced its financial results for the quarter and fiscal year ending March 31, 2024, showing notable growth in both profit before tax and net profit.
For the quarter ended March 31, 2024, ICICI Bank's profit before tax, excluding treasury, increased by 19.2% to ₹14,602 crore, while the net profit rose by 17.4% to ₹10,708 crore compared to the same period last year.
Furthermore, ICICI Bank appointed Mr. Pradeep Kumar Sinha as the Non-executive Part-time Chairman following the retirement of Mr. Girish Chandra Chaturvedi. The bank also announced the resignation of Mr. Pranav Mishra, a member of the bank's senior management, which will take effect on July 9, 2024.
The bank's board is also considering raising funds through the issuance of debt securities, including non-convertible debentures, via private placement, and deliberating the buyback of debt securities within the legally authorized limits. This strategic move is aimed at strengthening the bank's capital base and enhancing its ability to cater to the financial needs of its customers.
Lastly, ICICI Bank has scheduled an earnings call with media and analysts to discuss the financial results for the quarter and fiscal year ended March 31, 2024.
InvestingPro Insights
ICICI Bank's operational resilience and financial performance continue to shape its market presence, with the bank being a prominent player in the banking industry. Notably, the bank has demonstrated a commitment to shareholder returns, having raised its dividend for four consecutive years. This aligns with Axis Capital Limited's positive outlook, reinforcing the bank's solid profitability trajectory.
InvestingPro data highlights ICICI Bank's robust financial metrics, including a P/E ratio of 19.69 and an even more attractive PEG ratio of 0.67, suggesting that the bank's earnings growth could be undervalued. Furthermore, the bank's revenue growth has been impressive, with a 35.34% increase over the last twelve months as of Q4 2024. Investors should also note that ICICI Bank is trading near its 52-week high, reflecting strong market confidence backed by a significant price uptick over the last six months.
For those looking to delve deeper into ICICI Bank's investment potential, there are additional InvestingPro Tips available, which can be accessed at https://www.investing.com/pro/IBN. These tips provide further insight into the bank's performance and future outlook. Moreover, readers can use the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, unlocking a wealth of investment knowledge and tools.
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