ICICI Bank - To Reap Rich Benefit of Being Conservative; Reiterate "BUY" - Karvy

Substantial Improvement in Asset Quality: There has been substantial improvement in the asset quality of ICICI Bank with its Gross NPA improving >200 bps in three years vis-à-vis industry trend of further deterioration. Its restructured book at just 2.1% of loan book seems to be at comfortable zone. As per the Bank's Management, the credit cost - including restructuring related provisioning - would remain within 0.75% of loan book in FY14E. The Bank's Management has guided restructuring pipeline of Rs. 20 bn for H2FY14E.

Outperformance of Balance-sheet Growth: Picking up the pace, the Bank's balance-sheet growth has started growing marginally above the industry compared to underperformance last year. Though the Bank's retail credit has shown the initial signs of revival, it has shifted significantly away from the unsecured retail credit. It has now built a strong CASA base of 43.3% in Q2FY14 from 28.7% in FY09.

Improved NIMs - To Sustain at Current Levels: The Bank's NIMs has improved by 60 bps over last three years to 3.2%, with push from domestic as well as international segment. Its Management has guided for stable NIMs, going ahead. We believe with CASA at comfortable levels, it won't be very difficult for the Bank to maintain the NIMs at current levels.

Outlook & Valuation

We reiterate our "BUY" recommendation on ICICI Bank with unrevised target price of Rs. 1,190 per share valuing parent at 1.8x P/ABV FY15E and Rs. 200 for subsidiaries.

Source : Equity Bulls

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