ICICI Bank Ltd. share price target

We continue to like to the structural change in the bank's B/S (increasing retailisation) and P&L fortification (better margins, lower LLPs due to better coverage). These trends appear sustainable and are likely to persist over the medium term. Our estimates did factor a slight increase in stress in the near term, hence they have not changed significantly. Limited exposure to known stressed names gives us some comfort and we believe the worst in terms of asset quality is long past ICICIBC. Maintain BUY. ICICBCs 2Q was ahead of our estimates. Reported asset quality was stable. The higher influx into the BB and below rated pool disappointed mildly. This was expected, given the spate of downgrades and peer commentary in 1Q. Maintain BUY with an SOTP of Rs 510 (2.0x Sept-21E core ABV of Rs 193 and sub-value of Rs 125).

ICICIBC reported earnings of Rs6.55bn (PLe: Rs0.25bn) as it marked down DTA of ~Rs29.0bn, while all round contribution to PBT was from strong NII growth, other income and comparatively lower provisions. Bank enhanced its PCR further by 200bps QoQ to 76% (85% incl. technical w.off) and is best in industry, while lower slippages helped asset quality improvement. BB & Below is steady at 2.6% of loans. Improving NIMs, strong PCR with lowering asset quality risks and control on opex keeps the bank on path of strong recovery in earnings leading to 16-17% ROE for s'lone entity by FY22. We...

26 October 2019 ICICIBC reported 2QFY20 PAT of INR6.5b (-28% YoY), higher than our estimate of INR4.5b, led by strong NII and other income. Adjusted for the DTA reversal of INR29.2b, PAT would have been INR35.8b. PPoP grew 19% YoY to INR131.6b, while PAT came in at INR25.6b compared to INR7.9b in 1HFY19. NII increased 25.6% YoY to INR80.5b, led by 12.

Net interest income improved 26.8% YoY, partly offset by weakness in other income, which declined 11.1% YoY. On improving asset quality and strong profitability, we maintain our...

Loan grew 14.7% YoY (18% YoY for domestic loans) led by retail loans, particularly unsecured and home loans. Deposit growth was strong at 20.8% YoY, led by term deposits (up 34% YoY) resulting in moderation in CASA to 45.2%.

ICICI Bank saw healthy domestic loan growth of 17.9% YoY with NII outperforming the loan growth at 26.8% YoY. Its asset quality has seen marginal improvement with GNPA coming at 6.49% vs 6.70% QoQ. Its Net NPA has reduced from 2.06% to 1.77% QoQ mainly by increasing the provision coverage ratio (incl technical write-offs) to 83.4% from 80.7% QoQ. Its deposit growth of 20.8% YoY has outperformed the loan growth. Advances ICICI Bank saw healthy loan growth of 17.9% YoY largely driven by Retail growing at north of 22%. Keeping economic uncertainty in mind management is not targeting any loan book growth number. It sees huge potential to increase penetration in...

ICICI Bank's (ICICIBC) early delinquency indicators, as disclosed in its 20F filing for FY19, suggest corporate loan stress has been largely dealt with.

ICICI Bank Ltd reported a stellar set of numbers in its Q1FY20 results, beating our and consensus estimates on all parameters.

As structural changes become more entrenched at the bank (retail loans are ~61% of book, improving corporate asset quality), ICICIBC's reported financials will improve and stabilise. It is the cheapest large PVT bank. Continuous stability/improvement in core parameters underpin our thesis of its trajectory towards normalised earnings/RoAAs. The recent slew of defaults and weakening macros pose some risk on this path. ICICIBCs 1QFY20 show was mildly ahead of estimates. Our healing thesis is mostly playing out (slippages and credit costs continue to moderate, coverage is now best-in class). Maintain BUY with an SOTP of Rs 492 (2.0x Jun-21E core ABV of Rs 189 and sub-value of Rs 113).