ICICI Bank reported net profit of `1,605cr in Q3FY2019, lower than estimates owing to higher provisions (up 19% yoy). Higher provisions due to aging of bad assets, this Led to PCR increasing sharply by 900pbs qoq to 68.5% (considering Technical/prudential write-offs it stood at 76%)
Outlook & Valuation: At the current market price, the bank’s core banking business (after adjusting the value of subsidiaries) is trading at 1.4x FY2021E ABV. We believe strength of liability franchise (CASA – 50%), shift in loan mix towards retail assets & better rated companies, strong capitalization (tier I of 15.1%), 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 `460.

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