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Reliance Securities
ICICI Bank (Buy)
CMP: ₹536.35
Target: ₹650
ICICI Bank has reported a healthy operating performance in Q3. Improving margin, steady growth in fee-based income and high treasury gains led to 24 per cent y-o-y and 23 per cent y-o-y growth in NII and PPoP, respectively. Despite sequential decline in provisions led by recoveries from a fully provided steel account, provisioning was higher than our estimate, as the Bank recognised two large corporate accounts as NPA, one of which was fully provided for. Consequently, though slippages were higher at 3 per cent compared to sub-2 per cent over the previous two quarters, GNPA ratio declined by 40bps q-o-q to 4.95 per cent.
The Bank’s ‘BB’ and below book increased to 2.7 per cent of loans (up 10 bps q-o-q), led by elevated downgrades at ₹2,600 crore including a large telecom account. Advances growth at 13 per cent y-o-y was steady, with domestic advances growing by 16 per cent y-o-y.
Valuation: At CMP, the stock trades at 2.4x Dec-21E ABV. Rolling over our estimate to Dec-21E, we maintain our BUY recommendation on the stock with a revised SOTP-based target price of ₹650, which including the value of subsidiaries implies 3x of Dec-21 P/ABV.
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