Stocks for 2023: Analysts bet big on this bank that gave index-beating returns for 2 years!

Banks and financials constitute a third of FIIs’ overall portfolio. In 2022 so far, the Nifty Bank index has gained about 22%, giving the best returns in six years. The index has outperformed Nifty 50 by a wide margin.

And one of the stocks that has aided the outperformance of the sectoral index is

.

The stock has given index-beating returns for the two consecutive years. Year-to-date, shares of the private sector lender have risen 22%, outperforming the Nifty 50 which has gained 4% in the same period. The stock has also outperformed the MSCI India index by over 19%.

The quality of earnings remained strong for ICICI Bank with a steady improvement in net interest margin, strong double-digit growth in core fee income, and lower credit costs. The strong improvement in domestic consumption has bolstered the lender’s retail loan book.

According to Institutional Securities, ICICI Bank has cemented its stalwart position with a highly efficient large liability franchise, strong capital ratios, steady asset quality and best-in class return ratios.

“We see ICICI Bank delivering strong compounding returns with valuations set to re-rate higher,” the brokerage, which has the stock among its picks for 2023, said in its report.

The brokerage’s 12-month target price for shares of ICICI Bank is Rs 1,100. This implies an upside potential of another 22% from current levels.

The banking sector’s balance sheet is the strongest it has been in the last 10 years. Further, credit growth of over 17% is at a 10-year high, indicating continued improvement in economic activity.

“The risk-reward looks attractive to us, with the potential for both upgrades and re-rating. We believe that banks with strong liability franchise and large branch networks would benefit more as maintaining deposit growth in a rising rate environment will be a key challenge,” Alok Agarwal, portfolio manager at Alchemy Capital Management told ETMarkets in a recent interview.

For

, BofA Securities, Morgan Stanley, and Nomura Financial Advisory and Securities, ICICI Bank remains among the top picks.

In Credit Suisse’s 30-stock India portfolio, ICICI Bank is among the top 10 stocks with a 7% weightage. In Morgan Stanley’s 10 ‘focus list’ of stocks, ICICI Bank is the 4th.

Nomura sees low risk to earnings given a stronger balance sheet and lower probability of a material deterioration of asset quality.

“For 2023, we expect banks to outperform the broader market as growth outlook improves,” it said in a report.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of Economic Times)