ICICI Bank To Rise Above Peers On Higher Tech Spends, Customer Focus: Analysts
ICICI Bank's 360-degree customer approach and novel tech initiatives are making it an analyst favourite
India's second largest private lender ICICI Bank Ltd. is developing a 360-degree strategy, while investing heavily on technology. This, analysts say, is improving its growth runway, as the bank remains the top pick among private banks for them.
While the focus continues to be to improve profitability in a risk-caliberated manner, the tech initiatives will push ICICI Bank above its peers, analysts noted. The lender held an analyst meet last week to showcase the initiatives it has taken over the last few years.
"ICICI Bank appears to be several notches above its peers, when it comes to business transformation, led by tech initiatives and these digital capabilities will enable the bank to deliver superior growth over years to come," Motilal Oswal said in a report on Monday.
The brokerage expects ICICI Bank to deliver 20% compounded annual growth rate on its loan book, return on equity of 17.2% and return on assets of 2.1% by FY24.
The bank's 360-degree approach covers family offices, employees, supply chain financing, statutory payments and corporate solutions, enabling better service quality to its corporate customers.
As a strategy, the bank has also merged its rural banking centers with retail centers, fully aligned its retail assets distribution with liabilities, and converged micro, small and medium enterprises and private banking teams with retail and credit business centers, co-located in its business center, Emkay Global analysts said.
The bank is now adopting a corporate 360-degree approach, whereby the corporate relationship manager's role has been changed to the role of a co-anchor, curator, connector, and facilitator, the brokerage said. This will not only drive the lending relationship but also capture the corporate ecosystem to offer payments, liability, treasury, forex, derivatives among others, Emkay Global said.
On the retail front, the bank's efforts to lower acquisition cost through partnerships and improving product offerings is also paying off. For example, its credit card product with Amazon Inc has helped build a 3.5 million customer base, where 35% of the customers are new to bank. The spends on these cards at 20% higher than the industry average, while risk is 30% lower, analysts noted in their reports.
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Tech Initiatives
The bank has consistently increased its spends on technology, which have risen from 6% of operational expenditure in FY20 to 9% now. This is likely to remain elevated as the lender will continue to invest in building tech capabilities.
Customer profiling is being done for acquiring deposits and acquiring right counterparties for products. The bank has also invested in artificial intelligence to enhance sales, which has led to 1.4 times improvement in conversion, compared with generic rule-based triggers.
ICICI Bank's focus remains on digitising the credit underwriting process and using assisted underwriting models for new to bank customer or customers looking for an enhance limit.
The aim is to improve the pre-approved offers proposition for the whole journey to remain seamless and improve turnaround time, Motilal Oswal said. Manual underwriting is expected to come down to 8% by March 2023 from 45% in FY19, they said.
The bank is also working on iMobile 3.0, the latest iteration of its successful mobile application which also allows non-ICICI Bank customers to use its services. This will be a future-ready mobile application, which will be launched soon.
"We see ICICI Bank delivering 19% CAGR in earnings over FY22-F25 and RoE of 17% in FY24. Valuations are also reasonable and insights from analyst day improves medium term visibility on strengthening of franchise," Jefferies said in a report on Monday.