Published on 2/12/2019 10:12:27 AM | Source: Dolat Capital Market Pvt Ltd

Accumulate ICICI Bank Ltd For The Target Rs.515 - Dolat Capital

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* Profits better than expected. Slippages fell and GNPA improved 12 bps.

* Slippages were lower at 155 bps and so were the credit costs at 157 bps. However, the bank’s BB and below book rose 5% to 160 bn in lieu rating downgrades.

* The bank’s advances and deposit growth have held up and deposits grew a commendable 25% YoY aiding an operating profit of 20+% YoY.

* We like the bank for its deposit franchise, efforts in the SME segment (albeit growing yet), improvement in NIMs and constrained slippages. We increase our target price to factor the market share gains and growth in advances; higher quality of earnings, bettera NIMs and improving asset quality. We have not factored the recoveries from a steel account which is likely to witness completion. This is likely to remain a even positive trigger

* Valuing the bank at 2.2x FY21E and raise the target to 515 from 465, maintain Accumulate.


Slippages normalize, but BB and below book deteriorate.

Slippages were lower at 155 bps, down 11% QoQ. This was driven by reduced or absence of lumpy assets in the corporate book. However, it is too early to infer the absence of stress from larger corporate accounts. The Retail slippages were lower as well, partly seasonal, down 12% QoQ. The corporate and retail slippages were 199 bps and 145 bps of its respective advances. We have factored slippages at 180 bps for the year and GNPA at 6.8%. This is without factoring the recovery of the steel account which is now likely to witness conclusion earlier.


Healthy advance growth; Better placed to capture market share

The bank did not disappoint in its advance and deposit growth, growing at 14% and 25% YoY respectively. The deposit growth positively surprised us. Even if this rate may be unsustainable for deposits, we believe the bank continues to remain well placed to capture market share in its advance and deposits, esp. when the industry is likely to witness consolidation. The lumpy recovery is expected to further boost its profitability. The bank is well placed to improve its NIMs driven by change in mix, falling interest rates and relatively lower fall in yields as risk aversion remain high.


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