ICICI Bank (Buy)

The Hindu Business Line - - STOCKS -

CMP: ₹306

Tar­get: ₹340

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.

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