Buy ICICI Bank; target of Rs 427: Prabhudas Lilladher

Prabhudas Lilladher’s research report on ICICI Bank

ICICIBC showcased strong earnings beating estimates on back of better NII & fees/treasury, while bank did keep higher provisions rate but it helped improve PCR by 900bps QoQ to 68.5%. Slippages of Rs20.9bn was multi quarter lows and much below expectations, while large recovery helped asset quality ratios to improve substantially and also see benefit in margins. Overall stress levels are also reducing with much better upgrades seen in this quarter bringing down overall BB & Below book to 3.3% of loans. ICICI’s franchise scores better in liabilities (both CASA/TDs), technology and products, while other metrics like high PCR helping normalize credit cost, potential recoveries from NCLT lists and fees will help return ratios on a gradual uptick. ICICIBC remains 20-25% discount to Axis with similar profile and should see discount narrowing.

Outlook

We retain BUY with revised TP of Rs427 (from Rs415) based on 2.0x (from 1.8x) on core sep-20 ABV and Rs117 to subs.

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First Published on Feb 12, 2019 01:34 pm

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