Investors must focus on ICICI Bank's large corporate exposure: Girish Pai

In an interview with ET Now, Girish Pai, Head of Research, Nirmal Bang Institutional Equities, shares his views on markets. Excerpts:

ET Now: Why are market men treating ICICI Bank just like another PSU stock?

Girish Pai: ICICI Bank has got a fairly large exposure to Indian corporates unlike some of the other private banks which have either got far larger retail book or if you look from a corporate standpoint, they are working with working capital loans and not so much the project loans. To that extent, what has happened is the fact that the economic recovery has not been good. There are problems in the steel sector and in the power sector, industries are going through their bit of pain and if you look at the last two-three quarters for ICICI Bank, the asset quality has not been that great except that the last quarter slippages have come in little better than what market was anticipating.

So, if you look at ICICI Bank versus Axis Bank, we had second half of fiscal year 2015 where Axis Bank was reporting better asset quality numbers whereas ICICI Bank was reporting worsening asset quality numbers. So ,you saw situation where Axis was outperforming ICICI Bank and maybe we think that trade has probably played out considering what ICICI Bank has delivered in terms of the slippage number for Q1.

ET Now: Are markets ignoring the fact that they still have a very large retail presence, they still have a security subsidiary and insurance subsidiary which is profitable, so ICICI Bank is not just a bank, you are getting subsidiaries which are embedded in it?

Girish Pai: But markets will still focus on the big negative, which is the very large corporate exposure, that too focused on projects where there are issues, especially the steel sector which is going to see a set of big problems.

ET Now: If there is a bad loan in the town, ICICI Bank will have some exposure to that ...

Girish Pai: It is quite likely because it is a largest private sector bank. So, if you are the largest among the largest banks in town, you would be having exposure of some sort or the other to bad loans, you really cannot escape that.