Buy ICICI Bank; target of Rs 520: Motilal Oswal

Motilal Oswal's research report on ICICI Bank

ICICIBC's 1QFY20 PAT of INR19.1b (est. of INR21.2b), was led by strong NII and controlled opex. Core PPoP grew a healthy 21% YoY (in-line). NII grew 27% YoY to INR77.3b, led by healthy loan growth with additional boost from interest on IT refunds. NIMs stood at 3.62% v/s 3.72% in 4QFY19 including 9bp impact on IT refund (INR1.8b) and 8bp impact due to interest collection from NPLs. On a like-to-like basis, margins moderated marginally by 3bp QoQ. Other income declined 11% YoY as 1QFY19 had stake sale gain from IPRU while core fee income grew ~10% YoY (retail forms 72% of total fees). Total income, thus, was up 12% YoY to INR111.6b (in-line). Opex grew 18% YoY due to higher employee expense growth of 29% YoY (due to higher retirement led provisions). Advances grew 15% YoY with domestic book growing 18% YoY (~22% YoY growth in retail), while overseas loan mix declined further to 10.1%. Deposit growth stood healthy at 20.8% YoY. Term deposits grew 34% YoY, resulting in moderation in average CASA mix to 43.4% v/s 44.6% in 4QFY19.

Outlook

We expect the bank to deliver loan CAGR of 17% over FY19-21E, and estimate core RoA/RoE to improve to 1.5%/15.5%. Maintain Buy with a revised SOTP-based TP of INR520 (2.2x FY21E ABV for the bank). ICICI remains our top pick in the sector.