Analyst Corner| ICICI Prudential Life: Maintain ‘buy’ with target price of Rs 700

On the again of improved franchise, these banks have introduced 25-50bps lower of their retail time period deposit charges and have additionally lower rates of interest on financial savings deposits by as much as 300bps.

Companion banks have simproved deposit franchise & lower deposit charges: ICICI Pru Life’s new bancassurance companions (IIB, AU Financial institution, IDFC First Bank and RBL) have seen their retail deposits develop by +60% YoY in FY21 and the share of those deposits in whole have risen by 900bps YoY to 46%. Even Casa deposits rose by 50% YoY to 41% of whole, led by progress in financial savings deposits. A mixture of concentrate on retailisation of deposits with greater charges than friends (150-200bps premium over bigger banks), slower asset progress and consumer servicing helped enhance their deposit profile. On the again of improved franchise, these banks have introduced 25-50bps lower of their retail time period deposit charges and have additionally lower rates of interest on financial savings deposits by as much as 300bps. Our latest conversations with administration point out scope for extra cuts in deposit charges in future as effectively.

Decrease charges can direct flows in the direction of conventional merchandise: Even because the lower in deposit charges primarily displays the strengthening of their deposit franchise, we imagine that it’ll have a constructive rub-off for cross-sell of economic merchandise, particularly the place returns are assured (like non-par merchandise and annuities) in addition to different conventional merchandise like PAR. We perceive that these platforms collectively had originated about Rs 6-7bn of annualised new premiums over previous yr and targets can be to double this within the subsequent 3 years or so, with ICICI Pru Life being a key beneficiary.

Improved progress visibility can drive re-rating; Keep BUY: At the same time as Covid wave 2.0 can have some enterprise impression within the shorter-term, we imagine that traction on these new partnerships is bettering. We see a VNB rising at 19% Cagr over FY21-24 led by uptick in premium progress; working ROEV of 15% in FY22. Our FY23 VNB can see 15% upside if the administration achieves their goal. In our view, ICICI Pru Life supplies one of the best risk-reward amongst life insurers and we increase our goal worth to Rs 700 (from Rs 640) primarily based on 2.7x Mar-23 P/EV.