Motilal Oswal Financial Services (MOFSL) has identified ICICI Bank Ltd as its premier 'Buy' recommendation within the Indian banking sector, forecasting a substantial 39% upside potential. This optimistic outlook comes despite the stock's recent tepid performance, reflecting broader industry derating amidst persistent foreign institutional investor (FII) selling.
MOFSL's target price for ICICI Bank is set at Rs 1,750, a significant premium over its recent trading price of Rs 1,258. The brokerage's confidence stems from several key factors highlighting the private lender's strong fundamentals and growth trajectory.
Robust Loan Growth and Liability Strength
Analysts at MOFSL anticipate ICICI Bank will achieve a 16% Compound Annual Growth Rate (CAGR) in loans between FY26 and FY28. This growth is expected to be propelled primarily by robust expansion in its Business Banking and Personal Loan (PL) segments. Additionally, the corporate segment is projected to show healthy traction, supported by increasing working capital demand.
The bank's liability franchise remains a best-in-class performer, underpinned by diversified acquisition strategies and a rapidly expanding physical branch network. With a domestic Credit-Deposit (CD) ratio of 85.5% and a Liquidity Coverage Ratio (LCR) of approximately 126%, ICICI Bank is strategically positioned to capitalize on emerging growth opportunities more effectively than many of its competitors.
Cost Leadership and Asset Quality
Despite significant investments in technology, customer delivery platforms, advanced analytics, and talent acquisition, ICICI Bank is expected to maintain its cost leadership. MOFSL estimates the bank's Cost-to-Income (C/I) ratio to hover around 39% in FY27 and 38% in FY28, demonstrating efficient operational management.
The bank's asset quality continues to be a strong point, supported by disciplined underwriting practices, continuous monitoring, and effective recovery efforts. ICICI Bank also maintains a healthy contingency buffer, representing 0.9% of its total loans. Furthermore, the bank currently faces no additional portfolio stress from the West Asia crisis or the impending Expected Credit Loss (ECL) transition. Consequently, credit costs are anticipated to remain contained, with Gross Non-Performing Assets (GNPA) and Net Non-Performing Assets (NNPA) projected to improve to approximately 1.4% and 0.3% respectively by FY28E.
Path to Rerating
While ICICI Bank's stock has seen a period of underperformance, MOFSL believes a gradual rerating is on the horizon. This expectation is based on the bank's consistently strong operating performance and sustained market share gains across crucial lending segments. The brokerage projects a Return on Assets (RoA) of 2.3% and a Return on Equity (RoE) of 16.2% by FY28E, reinforcing its conviction that ICICI Bank remains a top 'BUY' in the banking sector.