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Pick Of the Week – ICICI Bank



We hereby present you our investment idea for Equity Investment i.e “Pick of the Week”. A thorough analysis of company, industry and economy goes behind our stock ideas for you. With the “Pick of the Week”, you may earn superior returns in stock market over a time horizon of 6 – 9 months.



INVESTING RATIONALE


• Loan growth led by Retail: Overall loans grew 15/1% YoY/QoQ in Q1FY20. Growth in domestic loans improved further to 17.9% YoY primarily supported by retail book (up 22.4% YoY and forms 61% of loans). Domestic corporate loans grew merely ~7% YoY.

• Robus PCR at 74%: After a sustained rise over FY19, provisions dipped ~42/36% to ~Rs 3500cr (i.e. 2.37% ann. vs. 3.79% QoQ and 4.64% YoY). NNPAs nearly halved YoY (-13% QoQ) to ~Rs 11900cr (1.8%). This resulted in a ~340bps rise in coverage to ~74% (which is amongst the best).

• Lower slippages: Led by lower corporate slippages which have come down by nearly 50% YoY/QoQ, overall slippages dipped to ~Rs 2800cr (1.89% vs. 2.47/3.14% QoQ/YoY). Retail slippages (Rs 1500cr) rose ~35/84%. After spiking in Q4FY19, write-offs were ~9/68% lower at ~Rs 2400cr. GNPAs dipped ~14/1% to ~Rs 45800cr (~6.5%). We expect incremental stress to moderate as the pool of low rated corporate exposures shrinks.

• Outlook: As structural changes become more evident at the bank with retail loans at ~61% of book and improving corporate asset quality, ICICIBC’s financials are expected to improve and stabilise. Control on costs, decreasing share of overseas business, high PCR, adequate capitalization and a stable management team provide comfort.

• We maintain a BUY with a target price of Rs. 462



WE RECOMMEND


  • CMP

    Rs.420

  • Target Price

    Rs.462

  • Potential Upside

    10%


* Note: Stock Investment horizon Approx. 6-9 months. CMP as on 09th August, 2018.

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