Buy ICICI Bank; target of Rs 362: Edelweiss

Edelweiss' research report on ICICI Bank
ICICI Bank’s Q1FY18 earnings were marginally lower than estimates, on soft core operating performance. While slippages were curtailed at 4.3% (~INR49.8bn), non-watch list slippages were high at 52% of corporate slippage (driven by 1 corporate account of >INR20bn), casting a shadow on veracity of the watch list claims. Retail/SME slippages were also high, largely being percolation of DeMon impact. Management highlighted that 2-3 accounts outside of drill-down list could emerge as stress over next couple of quarters, though overall slippages in FY18 will be lower than FY17. Core performance was soft owing to NIMs pressure (down 36bps QoQ) and soft growth (loan growth at <5% levels).

Outlook

However, bank’s strong franchise will enable it to deliver healthy normalised returns post short term hiccups. The stock is trading at 1.2x FY19E P/ABV. Maintain ‘BUY/SO’ with SoTP of INR362.

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