Accumulate ICICI Bank; target of Rs 385: Arihant Capital

Arihant Capital 's research report on ICICI Bank

ICICI Bank maintains a stable performance amid all the chaos of advance provisioning by major banks, well beyond RBI mandated 5% provisioning for Covid-19. NII increased by 17.1% YoY/4.5% QoQ, PPOP increased by 18.6% YoY/down 2.1% QoQ and Net Income increased to Rs 1,221 Cr, up by 26.0% YoY / down 70.5% QoQ. The decline in the bottomline could be attributed to the advance provisioning as per RBI guidelines for Covid-19 of Rs 2,725 Cr. Apart from the Corona crisis hit, the pre corona macroeconomic lull and slowing economy had an impact on the bank’s growth as well, with advances growing by a mere 10.0% YoY while deposit mobilization remained strong for the 2nd largest lender, up by 18.1% YoY/7.6% QoQ, as term deposits grew sharply after crisis in several smaller Private banks triggering the flee of capital to larger banks.

Outlook

ICICI Bank is currently trading at a 2.1x P/Adj. BVFY20. We assign a P/adj. BV multiple of 1.5x on FY22E adj. BV of INR 185 for standalone bank and use a SOTP approach to value its subsidiaries, arriving at a Target Price of INR 385 with an Accumulate rating.