Buy ICICI Bank; target of Rs 364: HDFC Securities

HDFC Securities' research report on ICICI Bank

After quite a few uninspiring quarters, ICICIBC showed evidence of recovery in  2QFY18.  Loan  growth  resumed  (+13%  QoQ in the domestic book), costs crawled (+3% QoQ) and NIM was stable (3.3%). Slippages, mercifully, were at an 8-qtr low. Management utilised profits from the subsidiary stake sale to beef  up  coverage  (59.3%,  +410bps  QoQ)  and  provided for NCLT a/cs two quarters in advance. While  slippages  have  trended  down  for the last couple of qtrs, we will closely  monitor  asset quality divergence, slippage from the watchlist and provision  requirements  (for  the  2nd  NCLT  list). Meanwhile, increasing granularity  in  the  Retail  franchise (assets and liabilities) and steady value accretion in subsidiaries are encouraging.

Outlook
A  probable  easing  of corporate stress and granular growth augur well for ICICIBC  hereon. Maintain BUY with a TP of Rs 364 (1.8x Sept-19 core ABV of Rs 142 + subs-value of Rs 107).

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