Buy ICICI Bank; target of Rs 362: Edelweiss

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26 Aug, 2025 12:21

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Edelweiss' research report on ICICI Bank

Our meeting with top management of ICICI Bank suggests: 1) Incremental stress asset accretion is limited to 2-3 accounts outside of the drill-down list and some retail stress is emerging due to full impact of loan waiver; 2) Though the pace of resolution is slow, process of resolving cases under NCLT is progressing well and resolution could gather pace over next 12 months. However, due to stipulated deadline and management change, realisation could be lower than the fair value estimated by banks; and 3) Management is re-orienting its balance sheet towards lower risk, well balanced and more granular portfolio which coupled with continued run-down in overseas book will keep asset growth soft. Retail franchise remains strong (retail advances grew >18%, retail fees >18%, CASA ~50% in Q1FY18), lending comfort. Consequently, we believe the bank’s strong franchise should enable it to deliver above-average normalised returns by FY20E, post uncertainty in the near term. Maintain ‘BUY.

Outlook
We believe these are challenging times for corporate banks manifested in temporary moderation in earnings. However, the bank is implementing measures like pruning concentration risk, targeting better rated credit mix on incremental lending and strengthening credit monitoring that will equip it to successfully progress through the next cycle. At CMP, the stock is trading at 1.0x FY19E P/ABV. Maintain ‘BUY/SO’ with SoTP of INR362.
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