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Last Updated : Jul 29, 2019 05:30 PM IST | Source:

Buy ICICI Bank; target of Rs 492: HDFC Securities

HDFC Securities is bullish on ICICI Bank has recommended Buy rating on the stock with a target price of Rs 492 in its research report dated July 29, 2019.

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HDFC Securities' research report on ICICI Bank

Slippages Dip: Led by lower corporate slippages (nearly halved YoY/QoQ), overall slippages dipped to ~Rs 28bn (1.89% vs. 2.47/3.14% QoQ/YoY). In line with previous trends, the BB and below rated book (~2.6% of advances) contributed as much as 92% of corporate slippages. Retail slippages (Rs 15bn) rose ~35/84%. After spiking in 4QFY19, write-offs were ~9/68% lower at ~Rs 24bn. GNPAs dipped ~14/1% to ~Rs 458bn (~6.5%). We expect incremental stress to moderate as the pool of low rated corporate exposures shrinks. This underpins our constructive stance. Our estimates factor annual slippage of 1.9% over FY20-21E. Retail Loans Drive Growth: Overall loans grew 15/1% YoY/QoQ. Steady retailisation continued, with retail loans (~61% of the mix) growing ~22/3%. Domestic corporate loans grew merely ~7% YoY (flat QoQ). We model 16% blended loan CAGR over FY19-21E. NIMs Dip Optically QoQ: NIMs dipped ~11bps QoQ to 3.61% (+42bps YoY). This was optical to the extent of ~8bps as 4QFY19 saw higher interest on IT refunds. Overall yields (~8.4%) were down ~5bps QoQ, while CoF (5.08%) was up ~8bps. We have tweaked our NIM estimates (~3.5% over FY20-
21E) upwards to factor higher yields (mix change) and lower CoF.


ICICIBC’s 1QFY20 show was mildly ahead of estimates. Our ‘healing’ thesis is mostly playing out (slippages and credit costs continue to moderate, coverage is now best-in class). Maintain BUY with an SOTP of Rs 492 (2.0x Jun- 21E core ABV of Rs 189 and sub-value of Rs 113).

For all recommendations report, click here

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First Published on Jul 29, 2019 05:30 pm
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