---
endpoint: analytics
pattern: Financial Services
status: done
latency_ms: 198177
conversation_id: 4560eb82-6bfe-4909-aae6-6bbd331ee411
citations: 0
created: 2026-05-31 18:39:17Z
---

# How does ICICI Bank’s valuation compare to peers, and what justifies its premium/discount?

# ICICI Bank Valuation vs Indian Bank Peers — Premium Justified by Best-in-Class ROA/ROE

ICICI Bank trades at the **highest P/B multiple among large Indian banks** in CLSA's coverage, but the premium is squarely supported by superior profitability metrics. CLSA rates the stock **Outperform with a Rs1,700 SOTP target price** (Rs1,450 parent value + Rs248/share net subsidiaries) [7][8], implying ~17% upside on a price of Rs1,454 [1].

## 1. The Peer Valuation Matrix (CLSA FY26CL/FY27CL — published 28 May 2025)

| Bank | Mkt Cap ($bn) | P/B FY26CL | P/B FY27CL | P/E FY26CL | P/E FY27CL | ROA FY26CL | ROE FY26CL |
|---|---|---|---|---|---|---|---|
| **ICICI Bank** | **122.0** | **2.6x** | **2.2x** | **17.7x** | **14.4x** | **2.1%** | **15.7%** |
| HDFC Bank | 174.7 | 2.4x | 2.1x | 18.7x | 15.2x | 1.7% | 13.1% |
| Kotak Mahindra | 48.8 | 2.4x | 2.0x | 20.6x | 16.6x | 2.0% | 12.2% |
| Axis Bank | 44.3 | 1.7x | 1.4x | 12.8x | 10.5x | 1.5% | 13.8% |
| IndusInd Bank | 7.3 | 0.9x | 0.8x | 8.4x | 7.4x | 1.3% | 10.9% |
| Federal Bank | 5.8 | 1.4x | 1.2x | 12.6x | 9.5x | 1.0% | 11.0% |
| SBI | 83.3 | 1.1x | 0.9x | 7.7x | 6.4x | 0.9% | 13.9% |
| BoB | 14.6 | 0.8x | 0.7x | 7.2x | 6.3x | 0.9% | 12.1% |
| PNB | 13.6 | 0.9x | 0.8x | 7.7x | 6.6x | 0.8% | 12.2% |
| Bandhan | 3.1 | 1.0x | 0.9x | 8.5x | 7.4x | 1.6% | 12.3% |

Source: CLSA, BBG [2]

**Headline read:** ICICI sits at the top of the P/B table at **2.6x FY26CL** — a clear premium vs HDFCB/KMB (2.4x), Axis (1.7x), the PSU pack (0.8–1.1x), and a massive premium to IndusInd/Bandhan (~0.9–1.0x). On P/E it is **17.7x FY26CL** — cheaper than Kotak (20.6x) and slightly below HDFC Bank (18.7x), but well above Axis (12.8x), SBI (7.7x), and the PSU pack (~7.2–7.7x).

## 2. What Justifies the Premium

### a) Highest ROA and ROE among large banks
CLSA's FY26CL DuPont (the cleanest like-for-like) confirms ICICI delivers the best fundamental returns of the cohort [2]:

| FY26CL DuPont (%) | HDFCB | **ICICIB** | AXSB | KMB | IIB | SBI | BOB | PNB |
|---|---|---|---|---|---|---|---|---|
| Net Interest Income / Assets | 3.2 | **3.8** | 3.4 | 4.2 | 3.6 | 2.5 | 2.5 | 2.3 |
| Total Income | 4.5 | **5.3** | 5.0 | 5.7 | 4.8 | 3.0 | 3.4 | 3.2 |
| Operating Expenses | 1.8 | 2.1 | 2.4 | 2.9 | 3.0 | 1.8 | 1.7 | 1.8 |
| PPOP | 2.6 | **3.2** | 2.6 | 3.0 | 1.9 | 1.6 | 1.7 | 1.4 |
| **ROA** | 1.7 | **2.1** | 1.5 | 2.0 | 0.6 | 0.9 | 0.9 | 0.8 |
| Leverage (x) | 7.8 | 7.4 | 9.0 | 6.2 | 8.6 | 15.0 | 13.0 | 15.3 |
| **ROE** | 13.1 | **15.7** | 13.8 | 12.2 | 5.5 | 13.9 | 12.1 | 12.2 |

ICICI's **2.1% ROA is the highest in the group** (only Kotak at 2.0% comes close among private banks) and its **15.7% ROE is the highest among large private banks** [2]. Critically, CLSA explicitly flags this: "It has the highest estimated ROE among all large banks under our coverage" [3]. PSU banks like SBI reach 13.9% ROE only through ~15x leverage on a sub-1% ROA — a structurally lower-quality earnings base.

### b) Outperformance on the cyclical drivers — NII and asset quality
In 4QFY25, CLSA noted "HDFCB and ICICIB outperformance on NII and asset quality while others were softer" [6]. Specifically:
- **NIM expansion**: ICICI's NIM expanded ~16bps QoQ to 4.4% in 4QFY25 [9], best-in-cohort.
- **CASA outperformer**: While CASA was sluggish system-wide in FY25, "ICICIB delivered 13% CASA deposit growth" — flagged as the clear standout by CLSA.
- **Asset quality intact**: gross slippage ratio 1.6%, credit costs only 0.3%, GNPL 1.7%, PCR 77% [9].
- **Opex discipline**: ICICI's expense ratio moderated sequentially to ~2.0–2.4%, and CLSA called out a sequential decline in the expense ratio [9].

### c) Lower estimate-cut risk vs peers
ICICI is the **only bank in CLSA's coverage with no FY26 PAT cut** post 4Q earnings — FY26 estimate change is 0.0% and FY27 is **+1.9%**, vs HDFCB (-2.6%/-2.0%), KMB (-4.8%/-2.6%), and IIB (-41.9%/-27.8%) [10]. This earnings-resilience supports the premium multiple.

### d) Loan-mix advantage in a rate-cut cycle
ICICI's loan book is **54% EBLR (External Benchmark Linked Rate), 15% MCLR, 31% Fixed** [9]. While this means near-term NIM pressure from repo cuts, the bank has already cut savings rates and CLSA estimates the top-3 private banks (HDFCB, ICICIB, AXSB) cut savings-account rates by 25bp in April, protecting NIMs by ~5-6bp. ICICI's diversified funding base and CASA strength cushion the pass-through better than CASA-weak peers.

### e) Earnings power: SOTP + RI model
The Rs1,700 target is built from a **residual income model** with risk-free rate 7%, equity risk premium 5.25%, beta 1.1, and **long-term ROE assumption of 18%** [11] — implying COE of 12.8%. Plug in CLSA's terminal ROE of 19.2% [12], and the bank earns a 640bp spread over cost of equity, which directly supports the elevated P/B (P/B floor ≈ (ROE − g) / (COE − g)).

## 3. Where Does the Premium "Stretch"?

- **P/B 2.6x is above the long-term mean** of ICICI's own history. On 12M Fwd P/ABV, ICICI trades at **2.5x in Apr-25**, vs a long-term range that includes lows of ~1.0x (Apr-20, Feb-16) and highs of ~2.7x (Dec-21) [13]. The Apr-25 print is near the upper end but not at peak.
- **12M Fwd P/E is ~18x** vs the long-term ~17.5x line — modestly above-average but well below the ~25x crisis peak [1]. PE is currently **below its own long-term average**, leaving room for re-rating if earnings deliver.
- **Vs Kotak (20.6x P/E)**: ICICI is cheaper despite better ROE — KMB's franchise premium has compressed as growth slowed and CASA fell faster than peers.
- **Vs HDFCB (18.7x P/E, 2.4x P/B)**: Very tight gap; ICICI's higher ROE (15.7% vs 13.1%) justifies its modestly higher P/B, while HDFC Bank's larger scale/franchise depth justifies its similar P/E.

## 4. Where the "Discount" View Comes In (vs PSU and second-tier)

Versus the PSU pack and stressed names, ICICI's ~3x P/B premium to SBI (1.1x) and BoB (0.8x) is justified by:
- **Asset quality differential**: ICICI's GNPL 1.7% + PCR 77% + credit cost 0.3% vs PSU credit cost typically 50–100bp higher across the cycle.
- **Earnings durability**: ROA of 2.1% vs SBI/BoB/PNB at 0.8–0.9% — the PSU "cheapness" reflects structurally lower fee income (DuPont other income: ICICI 1.4% vs SBI 0.5%), lower NIM (3.8% vs 2.3–2.5%), and stretched leverage (7.4x vs 13–15x) that magnifies any credit shock.
- **CASA franchise**: ICICI 42% CASA vs PSU CASA running materially lower.

IndusInd at **0.9x P/B** is the clearest "discount" case — the FY26 PAT estimate was cut 41.9% [10], ROA collapsed to 1.3% and ROE to 5.5% in the FY26CL DuPont [2], reflecting microfinance stress and the rectification-driven slippage spike. ICICI's premium vs IIB (2.6x vs 0.9x P/B) is the cleanest example of the quality bid in Indian banks today.

## 5. Bottom Line — Premium Verdict

ICICI Bank's premium is **earned, not stretched**. The 2.6x FY26CL P/B sits above peers because ICICI is the only bank simultaneously delivering: (i) top-decile ROA (2.1%), (ii) highest large-bank ROE (15.7%), (iii) best-in-class CASA momentum, (iv) the lowest estimate-cut risk in the sector, and (v) credit costs near multi-year lows [3][4][5]. The catalysts CLSA flags — "high-teens loan growth, aided by retail lending, and sustaining NIM above 4%" [4] — would re-rate the multiple higher, while the key risk is "slowdown in loan growth and sharp repo rate cuts" [5].

The valuation framework underlying the premium: **SOTP target of Rs1,700**, of which **Rs1,450 is the parent bank** (via RI model with COE 12.8%, long-term ROE 18%) and **Rs248/share is the subsidiary stack** (ICICI Pru Life, AMC, Lombard, Securities, Home Finance) net of a 20% holding discount [7].

---
**Sources**
[1] India Financials (4QFY25 Review: Divergent trends) — CLSA (28 May 2025) — 607960783LinqAlpha.PDF (Figure 68 Valuation matrix)
[2] India Financials (4QFY25 Review: Divergent trends) — CLSA (28 May 2025) — Figure 69 FY26CL DuPont
[3] India Financials (4QFY25 Review) — CLSA (28 May 2025) — Investment thesis - ICICI Bank Limited ICICIBC IB
[4] India Financials (4QFY25 Review) — CLSA (28 May 2025) — Catalysts - ICICI Bank
[5] India Financials (4QFY25 Review) — CLSA (28 May 2025) — Investment risks - ICICI Bank
[6] India Financials (4QFY25 Review) — CLSA (28 May 2025) — Figure 67 Consensus vs CLSA PAT estimates
[7] ICICI Bank - O-PF (Never stops surprising) — CLSA (20 April 2025) — 607956313LinqAlpha.PDF — New SOTP-based target price of Rs1,700
[8] ICICI Bank - O-PF (Never stops surprising) — CLSA (20 April 2025) — Investment thesis
[9] ICICI Bank - O-PF (Never stops surprising) — CLSA (20 April 2025) — Loan-mix EBLR/MCLR/Fixed table
[10] India Financials (4QFY25 Review) — CLSA (28 May 2025) — Figure 66 estimate changes / 12M Fwd P/E history
[11] ICICI Bank - O-PF (Never stops surprising) — CLSA (20 April 2025) — SOTP/RI valuation methodology paragraph
[12] ICICI Bank - O-PF (Never stops surprising) — CLSA (20 April 2025) — New RI model summary (value/share Rs1,450)
[13] ICICI Bank - O-PF (Never stops surprising) — CLSA (20 April 2025) — Figure 12 P/ABV historical / 12M Fwd P/E series

