ICICI Bank Q2FY2020 Result Update: Angel Broking

For Q2FY2020, ICICI Bank reported net profit of Rs. 655cr and if we adjust for DTA mark down charges of Rs. 2,920cr PAT would have been Rs. 3,575cr. On operating front, bank has reported very healthy set of numbers. Pre-Prov profit grew at 31% yoy led by strong growth in NII (26% yoy) and non interest income (33% yoy). Further, on asset quality front, bank improved almost in all parameters except moderate addition to BB & Below book.

Stable asset quality; BB & Below book marginally increased: During the quarter, the key monitorable was contained slippages, which was worth Rs. 2,482cr, of which Rs. 1,323cr slipped from retail book and Rs. 1,159cr slid from corporate book. Consequently, GNPA/NPA ratios improved 10bps/20bps qoq to 6.4%/1.6%. Key positive was PCR improvement of 200bps qoq to 76.1% (85% including Tech W/O), which is one of the highest in the industry. Key negative was increase in BB & Below book though it grew 5% qoq, however street was expecting lower trend in this book. Management comments indicate moderate addition in 2H, considering more number of rating downgrade. Management has guided credit cost of 1.2-1.3% for FY2020 (Considering recovery from IBC).

Advances led by retail lending; NIM stable: The bank's advances grew by 13% yoy (4% qoq) aided by healthy retail loan book growth of 22% yoy. The main drivers leading to the growth in the retail loan book were personal loans/credit card lending, which grew by 51%/40% yoy respectively. Retail contribution to total loans increased to 62% vs. 57.5% in Q2FY2019. NIM stood at 3.64% against 3.61% in Q1FY20 and 3.33% in Q2FY19. CASA ratio declined to 46.7% vs. 50.8% in Q4FY2019 as growth in term deposits (35% yoy) outpaced that in CASA deposits.

Outlook & Valuation: At the current market price, the bank's core banking business (after adjusting the value of subsidiaries) is trading at 1.9x FY2021E ABV. We believe strength of liability franchise (CASA - 46.7%), shift in loan mix towards retail assets & better rated companies, strong capitalization (tier I of 14.62%), steady improvement in stressed loan and going forward quick resolution under IBC would be the key triggers for expansion. We recommend a Buy on the stock with a Target Price of Rs. 532.

Shares of ICICI BANK LTD. was last trading in BSE at Rs.477.55 as compared to the previous close of Rs. 469.4. The total number of shares traded during the day was 1923000 in over 18144 trades.

The stock hit an intraday high of Rs. 481.95 and intraday low of 467. The net turnover during the day was Rs. 914692779.

Source : Equity Bulls

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