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ICICI Bank’s 3QFY17 results were in line with expectations. Though slippages
remained high, on an absolute basis it was lower sequentially and large part of
that came from the watch list. While overall loan book growth remained
moderate, domestic business remained decent and fee income gained traction. While the near term outlook for ICICI Bank remains
challenging, the asset quality issues is gradually waning. The bank might choose
to grow slow as far as loan book is concerned which we believe is a right strategy.
At the current market price, the bank’s core banking business (after adjusting
Rs80/share towards the value of subsidiaries) is trading at 1.3x FY2018E ABV.
Though some pain in asset quality is likely to persist in the quarters to come, we
believe the current valuations remain decent for the bank and hence we have an
Accumulate rating on the stock, with a target price of Rs315.

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