ICICI Bank is back as MFs’ favoured pick on valuations, growth

has emerged as one of the top holdings of domestic equity mutual funds in the past year after falling out of favour for a while. Fund managers and analysts said changes in the management led by the low-profile CEO Sandeep Bakshi, cheaper valuations and an increase in market share have prompted investors to take a relook at the stock.

The stock was the top holding in 44 actively managed diversified equity schemes in May 2021, according to data compiled by ETIG. It is closely followed by

which is the top holding in 26 such schemes and Infosys, which is the top holding in 10 schemes.

In May 2020, only five schemes held ICICI as their top bet, while 34 schemes owned rival HDFC Bank.

“We like the new leadership team, attractive valuations of ICICI Bank and believe it can grab market share as the economy turns around,” said a fund manager at a domestic fund house.

ICICI’s valuations are cheaper than retail-focused lenders like HDFC Bank and

. For instance, ICICI Bank trades at a price-to-book value of 2.73 times compared to HDFC Bank’s 4.79 times. The cheaper valuation and expectations of stronger performance have helped ICICI Bank shares rise by 79% in the past year, compared to 44% by HDFC Bank.

Money managers said the management led by Bakshi, who took charge in October 2018 is paving the way for capturing market share, especially from public sector rivals.

“The ICICI Group is undergoing a transformational journey under Sandeep Bakhshi who articulated the strategy of an input-driven approach and doing what’s right for the customer, without focusing on the output. His focus was to build predictability by doing away with lumpy provisions and focus on ‘risk calibrated growth’ instead of ‘only growth’,” said Vikas Khemani, founder, Carnelian Asset Advisors. ICICI Bank is Khemani’s top pick in the private banking space.

Some analysts are impressed with the ICICI’s digital capabilities. “The bank has made significant investments in building the digital capabilities, helping it deliver higher throughput and gain market share,” said Nitin Aggarwal, banking analyst, Motilal Oswal Institutional Research.

ICICI Bank ranks fifth in the Nifty50 and has a 6.8% weight in the benchmark index.

, HDFC Bank, Infosys and HDFC are ahead of it.

The bank has been bogged down by elevated bad loans amid the slowdown in industrial activity in the economy. The management has eased some of these concerns.

Gross non-performing loans as a percentage of advances reduced from 8.5% in 2018 to 5.8% in 2021. Retail loans as a part of overall advances increased from 57% to 67%.

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