Kotak Securities downgrades ICICI Bank to ‘add’

MUMBAI: Kotak Securities has downgraded ICICI Bank to ‘add’ from ‘buy’ earlier after the sharp run-up in stock prices in the past few weeks. It is of the view that ICICI Bank’s recent performance broadly reflects an improved outlook on the underlying business environment.

“We downgrade ICICI Bank to ‘add’ from ‘buy’ due to its strong performance in recent weeks (subdued interest rate outlook, policy reforms and/or a positive capital market). However, we have a cautious outlook on the macro-economic scenario and believe the key concern about asset quality may be addressed at a much slower pace. We don’t see a strong investment climate emerging over the medium term until the current bottlenecks have been adequately addressed,” the report said.

The brokerage believes that ICICI Bank’s RoE may stay subdued at 12 per cent compared with the management’s target and maintain RoA of over 1.5 per cent over the next two years, mainly due to higher credit costs.

However, the stock continues to be its preferred pick.

‘ICICI Bank trades at ~2X book (standalone) for RoE (medium term) of 12 per cent, leaving it limited room to appreciate. We retain ICICI Bank as our preferred pick,” the report added.

Kotak Securities has a price target of Rs 1,085 on the stock.

At 11:30 am, the stock was at Rs 1,034, down 1.42 per cent, on the BSE. It touched a high of Rs 1,041.75 and a low of Rs 1,030 in trade today.