Buy ICICI Bank; target of Rs 390: P Lilladher

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26 Aug, 2025 12:21

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Prabhudas Lilladher's research report on ICICI BankICICI Bank (ICICIBC) reported Q1FY16 PAT at Rs29.7bn (PLe:29.2bn) with in line operating performance. Revenue growth of 10% YoY remained slow mainly on lower treasury gains, but PAT was led by controlled opex and lower credit cost. Asset quality remained stable sequentially on lower fresh slippages than Q4FY15. However, ICICIBC has upfronted some of its restructuring and hence, restructured Rs19.6bn in Q1FY16. Management guided no pipeline, going ahead, on restructured or 5:25 scheme and re‐affirmed guidance of decline in stressed asset formation in FY16 v/s FY15. Declining trend in NPL formation, granular residual restructured book, coupled with positive management guidance and reasonable valuations makes us retain our ‘BUY’ rating on the stock with TP of Rs390.
NII growth on track; other income sluggish on lower treasury gains: ICICIBC reported 14% YoY growth in NII led by 22bps YoY & 11bps QoQ margin improvement to 3.6% mainly on strong growth in Retail & SME. Other income growth of ~5% was low mainly on lower treasury gains, while core fee income saw marginal uptick which is being mainly contributed by retail segment. Management has guided for double‐digit fee growth in FY16, led by retail fees.

Asset quality remains stable partly on lower slippages and partly from higher write‐offs: Fresh slippages of Rs16.7bn were lower than Rs32.6bn in Q4FY15, but made higher write‐offs of Rs10.8bn keeping asset quality stable with GNPL/NNPL increasing by 0.3%/1.2% QoQ. The bank restructured Rs19.6bn of loans and has no pipeline, going ahead. Guidance on credit cost is at 90‐95bps of loans for FY16 (currently at 97bps) as management re‐affirmed stressed accretion to be lower in FY16 than FY15 mainly on lower restructuring, lower lumpy relapses in restructured book and lower rate of slippages from loan book. Advances book tilt remains towards retail: Advances grew by 15% YoY with strong growth of 25% in retail with contribution from all segments, especially housing & un‐secured. Management has guided for 18‐20% loan growth with 25% growth in retail for FY16 and stable margins of at ~3.5%. ICICIBC is trading at ~20% discount to AXSB valuations and we believe discount would narrow on improving asset quality trends, high growth towards retail and re‐gaining market share in CASA enabling ICICIBC to improve its ROE profile in line with peers. We maintain ‘BUY’ with PT of Rs390.

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