EUR 120.00 For Business Accounts Only

MOSL: ICICI BANK (Buy)-Well placed in a challenging macro environment-Operating metrics improving steadily

ICICI BANK: Well placed in a challenging macro environment; Operating metrics improving steadily; Asset quality well-guarded!
(ICICIBC IN, Mkt Cap USD35.6b, CMP INR396, TP INR520, 31% Upside, Buy)

** ICICI Bank's (ICICIBC) annual report reaffirms our view that the bank is progressing well in its endeavor to strengthen balance sheet with strong focus on retail franchise. While its retail portfolio has been leading overall loan growth, GNPA has remained stable at 1.7% for many years; also, retail fees contribute over 70% to total fees.

** Concentration of the top-20 advances/exposures improved by 206bp/208bp to 12.1%/11.9% during the year. On the liability side, concentration of the top-20 depositors improved by ~50bp to 5.7%.

** BB and below pool reduced to INR175b (~3.0% of total loans) while net stressed loans declined to 3.3% (excluding NNPA). During 1QFY20, the BB & below pool further reduced to INR154b (~2.6% of loans) while net stressed loans declined to 2.9% (excl. NNPA).

** SA per branch has improved to INR448m in 1QFY20 v/s INR354m in FY17, thus, indicating higher productivity and operational efficiency at branch level. The bank has one of the highest proportion of retail deposits with a strong CASA mix.

** With asset quality stabilizing, we expect credit cost to moderate sharply and estimate core RoA/RoE to improve to 1.5%/15.5% by FY21. Maintain Buy with SOTP-based TP of INR520 (2.2x FY21E ABV). ICICIBC remains our top pick in the sector.