Buy ICICI Bank; target of Rs 337: Motilal Oswal

Motilal Oswal's research report on ICICI Bank

ICICIBC utilized one off capital gains of INR 56.8b (on Pru life stake sale) to provide (INR 51b) for stress loans (INR 13.6b of write offs, INR 17b of one off standard asset prov., INR 16b of floating prov. and up-fronting of prov. (INR 4b) for loss on sale NPAs). Further bank has aggressively provided for expected increase in AS-15 liability (due to fall in yields) during the quarter.

Movement from watch list and OSRL to actual balance sheet recognition/ and increasing pace of resolution is reducing uncertainty over the health of the balance-sheet. ICICIBC is utilizing one off non-core income to create buffer on the balance-sheet. Strong capitalization (Tier I of 13.3%), significant improvement in granularity of the book (53% retail and SME), sharp improvement in liability profile helping to build low risk business provides comfort. We cut earnings estimate by 10/7% for FY18/19 to factor in high provisions. Move SOTP to September 2018 to INR 337 (INR 307 earlier). Reiterate Buy.