Buy ICICI Bank, target Rs 490: Angel Broking

Angel Broking has given a buy recommendation on ICICI Bank with a target price of Rs 490.

Shares of ICICI Bank traded at Rs 432.7 around 1:10 pm on 30 July, 2019. The brokerage has set a one-year horizon for the stock to hit the target price.

Investment rationale:


Stable asset quality and stressed pool declined
During the quarter, the key monitorable was higher slippages from Kisan Credit Card portfolio (Rs 450 crore), which led the increase in retail GNPA ratio by nearly 20bps QoQ to 1.9 per cent.

Key positives for the quarter were decline in BB and below book by 40bps to 2.59 per cent of advances; on absolute basis it reduced by Rs 2,170 crore.

The management mentioned that exposure to new stressed corporate was limited which was also a positive for the quarter.

PCR at 73 per cent was among the highest in industry, and delinquency in retail business is less than industry.

Advances led by retail lending; NIM stable
The bank’s advances grew by 14.7 per cent YoY (1 per cent QoQ) aided by healthy retail loan book growth of 23 per cent YoY.

The main drivers leading to the growth in the retail loan book were personal loans/credit card lending, which grew by 55 per cent/33 per cent YoY, respectively.

Retail contribution to total loans increased to 61.4 per cent against 57.5 per cent in Q1FY2019.

NIM stood at 3.62 per cent against 3.72 per cent in Q4FY19, considering 17bps impact of refund and interest collection of NPA.

CASA ratio declined to 45.2 per cent against 49.6 per cent in Q4FY2019 as growth in term deposits outpaced that in CASA deposits.

Outlook & valuation
At the current market price, the bank’s core banking business (after adjusting the value of subsidiaries) is trading at 1.7 times FY2021E ABV.

"We believe strength of liability franchise (CASA - 45 per cent), shift in loan mix towards retail assets and better rated companies, strong capitalization (tier I of 14.6 per cent), steady improvement in stressed loan and going forward quick resolution under IBC would be the key triggers for expansion," said the brokerage.