Partner banks have simproved deposit franchise & reduce deposit prices: ICICI Pru Life’s new bancassurance partners (IIB, AU Bank, IDFC First Bank and RBL) have seen their retail deposits develop by +60% YoY in FY21 and the share of these deposits in total have risen by 900bps YoY to 46%. Even Casa deposits rose by 50% YoY to 41% of total, led by development in savings deposits. A mixture of focus on retailisation of deposits with larger prices than peers (150-200bps premium more than bigger banks), slower asset development and client servicing helped increase their deposit profile. On the back of enhanced franchise, these banks have announced 25-50bps reduce in their retail term deposit prices and have also reduce interest prices on savings deposits by up to 300bps. Our current conversations with management indicate scope for more cuts in deposit prices in future as properly.
Lower prices can direct flows towards conventional items: Even as the reduce in deposit prices mainly reflects the strengthening of their deposit franchise, we think that it will have a positive rub-off for cross-sell of economic items, specially exactly where returns are assured (like non-par items and annuities) as properly as other conventional items like PAR. We comprehend that these platforms collectively had originated about Rs 6-7bn of annualised new premiums more than previous year and targets would be to double this in the next 3 years or so, with ICICI Pru Life getting a important beneficiary.
Improved development visibility can drive re-rating Maintain Purchase: Even as Covid wave 2. will have some enterprise effect in the shorter-term, we think that traction on these new partnerships is enhancing. We see a VNB developing at 19% Cagr more than FY21-24 led by uptick in premium development operating ROEV of 15% in FY22. Our FY23 VNB can see 15% upside if the management achieves their target. In our view, ICICI Pru Life supplies the most effective threat-reward amongst life insurers and we raise our target price tag to Rs 700 (from Rs 640) based on 2.7x Mar-23 P/EV.