ICICI Bank (Buy)
We met ICICI Bank’s management recently and maintain a positive stance at current valuations. Key takeaways from the meeting are: a) overall potential stress for the bank is more than ₹27,000 crore (5.5 per cent of advances) including drill down list (₹19,600 crore), restructured book (₹2,300 crore), non-funded exposure to existing NPLs (₹2,100 crore) and unique exposures to SDR, 5-25, etc. (₹3,000 crore); b) Exposure to developer book has been coming off as bank is approaching this space cautiously; c) While management is confident on retail loan growth, even the good portion of corporate book continues to grow at mid-teen levels. We remain constructive on ICICI Bank and believe that our combined credit cost assumption of ₹21,600 crore over 2HFY18/FY19E and the 12 per cent hit on the book value on account of future haircuts on accounts under other forbearances (SDR, S4A, 5-25, restructured) sufficiently accommodates the stress on ICICI Bank’s book.