Jefferies raises ICICI Bank target as Q1 profits exceed estimates

Jefferies in a note on ICICI Bank's June quarter results said the moderation in loan growth was evident across the board, with the retail segment particularly affected. Nonetheless, the bank's deposit growth was healthy at 13 per cent year-on-year, with Current Account Savings Account (CASA) growth also robust at 14 per cent, the brokerage said it felt a 9 per cent growth in savings deposits contributed to the favourable deposit growth numbers.

ICICI Bank's first-quarter fiscal year 2026 profit surged 15 per cent year-on-year to Rs 12,800 crore, outperforming estimates set by Jefferies. The brokerage attributed the better-than-expected profits to higher core and non-core income lines, particularly from interest on tax refunds and enhanced treasury and dividend incomes. Despite a slowdown in loan growth to 12 per cent year-on-year, Jefferies maintained a positive outlook on the bank's stock, which remains among its top picks.

ICICI Bank's Q1 net interest income (NII) growth slightly surpassed expectations at 1 per cent year-on-year. This was boosted by higher interest on tax refunds, prompting Jefferies to revise the target price on ICICI's stock from Rs 1,710 to Rs 1,760. The brokerage pointed out that despite minor compression expected in the second quarter due to full rate cuts, margins are performing better than anticipated.

Asset quality remains a strong point for ICICI Bank, with stable trends reported across various segments. The bank reported a gross Non-Performing Loan (NPL) ratio of 1.7 per cent and specific coverage at 76 per cent. The management indicated that buffer provisions stand at 1% of loans. 

"Core margin trends (down 6-7bps 0oa) were also encouraging aided by fall in funding costs (reduction on high cost wholesale deposits and cut in savings deposits). Even though compression will be higher in 2Q due to full impact of rate cuts, margins are trending better than our estimates. Asset quality was largely stable with slippages of past year loans and credit cost of 0.5% of average loans," Jefferies remarked.

ICICI Bank's management remains optimistic about the future, anticipating improved growth driven by initiatives in retail and business banking. They expect growth to reach 14 per cent in FY26 and 15 per cent in FY27, facilitated by a favourable tax environment and lower interest rates boosting consumption demand.

The bank's consolidated profit trends have also been promising, with a 16 per cent year-on-year increase, and 6 per cent higher than standalone results. Subsidiaries such as securities, insurance, HFC, and AMC saw significant profit growth, though international banking and securities experienced some moderation.

The strong performance in the first quarter underscores the bank's strategy and positioning in the market. With a manageable Loan-to-Deposit Ratio (LDR) and healthy deposit growth, ICICI Bank is well-placed to take advantage of market conditions and enhance its growth trajectory.

Jefferies' positive assessment and the upward revision of ICICI's target price reflect confidence in the bank's ability to navigate the current economic landscape and deliver shareholder value. The outlook for the bank remains favourable, driven by strategic initiatives and market dynamics, the Jefferies note suggested.