Morgan Stanley maintained overweight call on ICICI Bank with a target price at Rs 460, implying a 28 percent potential upside.
Morgan Stanley feels the non-performing loans cycle has been turning and ICICI Bank's focus will be on ramping up coverage sharply.
"We should see a material drop in provisioning FY20 onwards," the research house said while maintaining overweight call on the stock with a target price at Rs 460, implying a 28 percent potential upside.
The trend of fall in provisions started in September 2018 quarter which helped the bank to post in line quarterly earnings.
Provisions and contingencies at the end of September quarter stood at Rs 3,994.3 crore, sharply lower by 33 percent sequentially and 11.3 percent compared to year-ago period.
Provisioning coverage ratio also improved by 330 basis points (bps) sequentially to Rs 69.4 percent, which further strengthened the balance sheet of the bank.
Asset quality improved during the quarter. Gross non-performing assets as a percentage of gross advances were lower at 8.54 percent against 8.81 percent in the previous quarter due to fall in slippages.
Gross NPA additions (slippages) decreased from Rs 4,036 crore in the quarter ended June 2018 to Rs 3,117 crore in Q2FY19, the private sector lender had said on October 26.
Morgan Stanley expects CASA ratio to moderate as growth picks up. Liquidity position of the bank is good & the lender aims to sustain via retail deposit focus, it said.
Domestic loan growth in September quarter grew by 16 percent YoY driven by retail loans that increased 20 percent YoY and constituted 57 percent of the total loan portfolio at the end of the quarter.
At 14:46 hours IST, the stock was quoting at Rs 363.30, up Rs 4.25, or 1.18 percent on the BSE.Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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