ICICI Bank Buy Call: MOFSL Targets 41% Upside FY28

MOFSL keeps ICICI Bank as top banking pick

Motilal Oswal Financial Services (MOFSL) has reiterated a ‘Buy’ rating on ICICI Bank Ltd and named it its top pick in the banking sector. The brokerage said the private lender is well-positioned to sustain growth momentum while maintaining profitability benchmarks. MOFSL’s target price is Rs 1,750 per share, and it values the bank at 2.5x Sep’27E standalone adjusted book value (ABV). The note comes at a time when the stock’s performance has been muted over the past year, alongside a broader derating in large banking stocks.

On Friday, ICICI Bank shares were last seen trading 0.46% higher at Rs 1,258. MOFSL’s target implies a 39.11% upside from Rs 1,258. Based on the bank’s previous closing price of Rs 1,242 on the NSE cited in the material, the upside works out to nearly 41%.

Growth forecast: 16% loan CAGR led by business banking and PL

MOFSL expects ICICI Bank to deliver a 16% loan CAGR over FY26 to FY28. The brokerage said the growth is expected to be led by strong traction in Business Banking and personal loans (PL). It also expects the corporate segment to see healthy traction, supported by working capital demand. The framing suggests that growth is not reliant on a single pocket of demand, but instead spread across multiple lending segments.

MOFSL also pointed to sustained market share gains across key lending segments as a key anchor for its constructive stance. It described the expected rerating as gradual, rather than a sudden revaluation, linking it to consistency in operating performance.

Liability franchise and liquidity: CD ratio 85.5%, LCR ~126%

MOFSL said ICICI Bank’s liability franchise remains best-in-class, supported by diversified acquisition engines and a rapidly expanding physical network. It cited a domestic credit-deposit (CD) ratio of 85.5% and a liquidity coverage ratio (LCR) of around 126%. According to the brokerage, these metrics position the bank to capitalise on growth opportunities compared to peers.

The note’s emphasis on funding strength is relevant in an environment where deposit competition and pricing can influence lending momentum and profitability. MOFSL’s view is that ICICI’s liability profile provides room to grow while keeping liquidity comfortable.

Costs and profitability: C/I seen at ~39% in FY27, ~38% in FY28

MOFSL expects ICICI Bank to maintain cost leadership despite meaningful investments in technology, customer delivery, analytics, and talent. It estimates the cost-to-income (C/I) ratio to range around 39% in FY27 and 38% in FY28. The brokerage also flagged operating leverage and fee income as key earnings levers, alongside cost discipline.

In its projections, MOFSL built in FY28E return on assets (RoA) of 2.3% and return on equity (RoE) of 16.2%. Separately, the material also referenced a view that the bank is firmly on track to deliver RoA of 2.2% in FY26E, despite one-off provisions in Q3, and RoE of 16% over FY26 to FY27.

Asset quality: contingency buffer at 0.9% of loans

MOFSL said ICICI Bank’s asset quality remains robust, supported by disciplined underwriting, continued monitoring, and strong recoveries. It noted that the bank maintains a healthy contingency buffer of 0.9% of loans. The brokerage added that the bank currently does not face additional portfolio stress from the West Asia crisis or an ECL transition.

With credit costs expected to remain contained, MOFSL projects gross NPA (GNPA) and net NPA (NNPA) to improve to around 1.4% and 0.3% by FY28E, respectively. It also highlighted low credit costs and robust provisioning as key supports for asset quality.

Why the stock has lagged: derating and persistent FII selling

MOFSL acknowledged that ICICI Bank’s stock has delivered tepid performance over the past year. It linked the muted returns to a broader derating across large banking stocks amid persistent foreign institutional investor (FII) selling. In another comparison cited in the material, ICICI Bank shares delivered a modest 6% return in FY26 so far, versus an average 21% return across FY23, FY24, and FY25.

The brokerage said this underperformance has left the stock trading at cheaper valuations compared with its own average trading valuations over the past three years. Even so, MOFSL’s base case is not built on a sharp near-term revaluation, but on a gradual rerating supported by continued execution.

Leadership stability: board backs Sandeep Bakhshi extension

MOFSL flagged governance and leadership continuity as an important sentiment factor. The bank’s board has recommended extending Managing Director and CEO Sandeep Bakhshi’s tenure by two years, which MOFSL said removed a key overhang and reinforced leadership stability. The note also described ICICI Bank as one of the more dependable large-bank stories in the sector.

The material further stated that, under Bakhshi’s leadership, the bank underwent a shift in organisational culture from individual performance to team performance, and that operating variables have shown lower volatility. MOFSL linked this stability to the bank’s ability to sustain “best-in-class” growth and profitability.

Key metrics and MOFSL call (summary table)

Broader sector context: MOFSL sees mid-sized outperformance

In its broader sector view, MOFSL said mid-sized players are set to outperform large banks in terms of earnings, supported by improving margins, easing stress in unsecured portfolios, and relatively stable credit costs. Even within that framework, ICICI Bank remains its top bank-stock pick, followed by HDFC Bank, State Bank of India (SBI), and AU Small Finance Bank.

The brokerage also noted that among larger private banks, earnings estimates have largely remained stable, with limited downward revisions, including for ICICI Bank. This context supports MOFSL’s stance that the ICICI thesis is based on steady operating performance rather than a turnaround narrative.

Conclusion: what to watch next

MOFSL’s ‘Buy’ call on ICICI Bank rests on a defined set of operating factors: a 16% loan CAGR expectation through FY28, a strong funding profile (85.5% domestic CD ratio and ~126% LCR), cost discipline (C/I trending to ~38% by FY28), and improving GNPA/NNPA projections. The brokerage also views the board-backed CEO tenure extension as a positive sentiment marker.

Near-term market moves can still be influenced by sector-wide valuation cycles and FII flows, which MOFSL cited as a recent headwind. For investors tracking the thesis, the key monitorables are the pace of loan growth across business banking, personal loans, and corporate working capital, and whether credit costs remain contained in line with MOFSL’s expectations.