Equirus Securities

ICICI Bank (Long)

CMP: ₹355.05

Target: ₹435

11,24,281

ICICI Bank is India’s largest private sector bank with total consolidated assets of ₹11.24 lakh crore at March 31, 2018 and profit after tax of ₹6,777 crore for the year ended March 31, 2018. ICICI Bank currently has a network of 4,867 Branches and 14,367 ATMs across India.

We expect ICICI Bank’s RoAs/RoEs to improve to 1.6 per cent/ 14.6 per cent by FY21E (FY19E: 0.5 per cent/4.7 per cent) led by a) a about 30 bps expansion in NIMs over FY19E NIMs of about 3.2 per cent; b) a sharp about 115 bps decline in provisions; c) contained incremental slippages (FY20E/FY21E: 1.8 per cent/1.3 per cent); and d) acceleration in loan growth (FY20E/FY21E: 17 per cent each).

We expect material improvement across parameters over FY19-FY21E with a) adequate capital (Tier 1: 15.4 per cent); b) a retail-heavy liability franchise with CASA at 50.8 per cent; and c) management change leading to a higher focus on business growth. After four years of flattish ABV of ₹100-110, we believe ICICI Bank’s standalone ABV will accelerate to ₹185 by FY21E.

We raise our FY20 loan growth/NIM estimates by 200 bps/30 bps and roll over to a SOTP-based March 2020 target price of ₹435 (September 2019 TP: ₹371), with subsidiaries valued at ₹98. Retain Long.