ICICI Bank · is Ke the flaw, or is ROE the flaw?
Our ₹788 intrinsic understates ICICI. The error is either on the ROE side (we're underestimating sustainable returns) or the Ke side (cost of equity is set too high). Decide which.
Around the table.
- ICICI AnalystFinancialsConfidence52%→72%+20
- Rates AnalystMacroConfidence58%→78%+20
- Flow AnalystFlowConfidence50%→68%+18
The conversation.
- Financials55%
My base case has sustainable ROE at 18.5%. I could push it to 19.5% with branch productivity and CASA mix, but it doesn't get to ₹1,150. The model is missing something other than ROE.
- Macro64%
Then look at the discount rate. India risk premium has compressed by 90–110 bps since the 2024 cycle. Our Ke of 13.2% reflects a 2023 view of equity risk. Update to 12.0% with beta at 1.00 — that's the cleanest reading of current rates plus a current ERP.
- Flow56%
FII derivatives book on ICICIBANK has had beta drift toward 1.00 over the last six months. Confirms the structural compression. Pair-trade book agrees: hedge ratio against HDFCBANK has tightened.
- Financials70%
Recalibrating Ke from 13.2% to 12.0% — that single change moves justified P/B from 2.0× to 2.6× and intrinsic from ₹788 to ₹1,150. Ke is the flaw, not ROE.