MOSL: ICICI BANK (Buy)-Board appoints new MD & CEO

ICICI BANK: Board appoints new MD & CEO; Clarity on top management to support re-rating

(ICICIBC IN, Mkt Cap USD27.6b, CMP INR316, TP INR380, 20% Upside, Buy)

• ICICI Bank’s (ICICIBC) board has accepted the request of Ms Chanda Kochhar for early retirement with immediate effect.
• The board appointed Mr Sandeep Bakhshi as MD & CEO for a period of five years until 3rd October 2023, subject to regulatory and other approvals.
• Ms Kochhar will also relinquish office from the board of the bank's subsidiaries.

 We believe that ICICIBC’s board decision to accept Ms Kochhar’s request for early retirement removes a major overhang on the stock and will likely help improve market perception of transparency and governance at ICICIBC. While Mr Bakhshi presented last quarterly results at ICICIBC, the upcoming results announcement now becomes much more important as it will provide much-needed clarity on the bank’s performance and the revised business strategy under the new leadership. We expect the bank to deliver 1.1% RoA/11% RoE by FY20, which should expand further thereafter. We reiterate our Buy rating on ICICIBC – one of our top picks in the banking sector – with an SOTP-based TP of INR380 (1.8x Mar’20E ABV).

A major overhang cleared – ICICIBC gets new MD & CEO: The appointment of Mr Bakhshi as MD & CEO has cleared the uncertainty around top management at ICICIBC. We believe that the development has raised hopes of a quicker turnaround in the bank’s earnings/business performance. Mr Bakhshi has been associated with ICICI Group for 32 years and also served as CEO at two well-performing subsidiaries – ICICI Prudential Life and ICICI Lombard – early in his career. We believe that Mr Bakhshi taking over the reins at a time when the corporate NPL cycle is in its last leg will enable ICICIBC to strategize well on its journey and alongside generate significant returns for its stakeholders. Under the leadership of Ms Kochhar, ICICIBC had shared its strategy to achieve 15% consolidated RoE by Jun-20 and a net NPL ratio of <1.5% by Mar-20.