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ICICI Bank reported net profit of `909cr in 2QFY2019, driven by strong growth in pre-provision profit (PPP). PPA was helped by strong uptick in margins (+14bps qoq) to 3.3%. Moreover, credit cost continued to moderate for ICICI (3.01% in 2QFY2019), with total provisions down 33% qoq to `3,994cr. Slippages were multi quarter low at `3,117cr, of which `1,304cr was owing to currency
depreciation.

Outlook & Valuation: At the current market price, the bank’s core banking business (after adjusting the value of subsidiaries) is trading at 1.6x FY20E ABV. We believe strength of liability franchise (CASA-51%), shift in loan mix towards retail assets and better rated companies, strong capitalization (tier I of 15.38%), steady improvement in stress loan and going forward quick resolution under IBC would be the key triggers for multiple expansion. We recommend a Buy on the stock, with a target price of `410.

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