ICICI Bank remains Dolat Capital's preferred pick in banking sector

ICICI Bank remains our preferred pick in the sector as the bank continues to show sustained improvement in earnings with stable asset quality. Improvement in banking ROE should continue and we expect it to touch 18% in two years.

- We believe that as the overall economic condition improves, the bank would also start showing an improving growth trend in balance sheet.

- We expect loan growth to improve from current levels of 14% YoY and expect loans to grow at CAGR of 21% over the next two years. Improvement in overseas NIM should offset pressure on domestic NIM and should lead to stable NIM over the next couple of quarters.

- ICICI Bank's Tier 1 of 12.8% is one of the highest in industry and should support its growth plans over the next 2 years. With sustained improvement in core ROE and stable credit cost, we believe that ICICI Bank can trade at its historical average PBR of 2x. Current valuations of 1.6x on FY14E banking BVPS is attractive and we have a buy on the stock with SOTP based target price of Rs 1360 (PBR of 2x on FY14 BVPS + Rs. 283 for value of investments).

Source : Equity Bulls

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