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ICICI Bank (Buy)
CMP: ₹370.15
Target: ₹410
ICICI Bank is India’s second-largest private bank with a loan book size of ₹5.12 lakh crore (FY18). As of FY18, the bank had market share of about 5.9 per cent in system loans. The bank has a strong distribution network of 4,867 branches and 14,367 ATMs.
ICICI Bank reported a stable third quarter performance with sharp improvement in asset quality. Slippages have moved to normalised levels (1.5 per cent of loans), gross NPA ratio is at a two-year low while net NPA ratio is at a three-year low. As incremental stress additions reduce, decline in credit costs will support ROE normalisation.
Levers are in place for continued traction and performance is expected to improve hereon. ICICI Bank is entering a new phase characterised by better asset quality, healthy credit growth and superior margins. We expect the bank to be well placed to capitalise on the credit up-cycle and expect management to achieve its near-term RoE target of 15 per cent. Subsidiaries remain profitable and add meaningfully to SOTP.
We assign a ‘buy’ on the stock with a target price of ₹410 (on SOTP assigning 2xcore ABV and sub-value of ₹80).
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