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Why ICICI Bank Stock Just Soared to All-Time Highs

What happened

Shares of ICICI Bank (NYSE: IBN) skyrocketed Monday morning to hit all-time highs of $22.14, mirroring its move in India: The India-based banking giant's stock also rallied double digits to hit all-time highs earlier in the day on India's National Stock Exchange, becoming the fifth-largest publicly listed stock in the nation based on market capitalization. As of 2:03 p.m. EDT, its shares were up 10.3%.

Record quarterly profits lifted investor enthusiasm in the bank stock as investors now see it even better poised to benefit from India's growing economy.

So what

ICICI Bank released a solid set of second-quarter numbers for fiscal 2022 on Saturday. Notable numbers (all changed year over year) from the earnings report include:

  • 17% jump in deposits to $131.7 billion.
  • 19% growth in domestic loan portfolio.
  • 25% surge in net interest income.
  • 26% rise in noninterest income.
  • 23% jump in core operating profit (profit before provisions and tax, excluding treasury income) to $1.3 billion.
  • 29% growth in profit after tax to $821 million.

Image source: Getty Images.

With India's economy reopening after the second wave of the COVID-19 pandemic that hit the nation hard in April-May, ICICI Bank saw a surge in demand for loans: Its retail loans, which made up 51.6% of its total loan portfolio, soared 20% year over year in the third quarter. Deposits also grew rapidly as investors locked in higher interest rates before a potential fall.

Most importantly, ICICI Bank's asset quality improved considerably, with its net nonperforming assets declining 12% sequentially to $1.1 billion.

The bank opened nine new branches during the quarter, taking its total to 5,277. It also reported strong traction in its digital and payments platforms, especially in its mobile banking application facility that was extended for use for nonaccount holders in December 2020. Nearly 1.5 million non-ICICI Bank customers registered on the app, called iMobile Pay, last quarter, taking the total number up to 4 million as of the end of September. The volume of transactions from such customers jumped almost 13-fold in Q3.

Now what

It's the second-largest private bank in India, right behind HDFC Bank, in terms of total assets, and the third-largest bank among private and public banks.

With ICICI Bank's loan mix and asset quality improving substantially and its net interest margin coming in at 4% versus HDFC Bank's net interest margin of 4.1% last quarter, investors are betting on the bank to overtake its closest rival in the coming quarters, sending the red-hot international stock flying through the roof.

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Neha Chamaria owns shares of HDFC Bank. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.


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