Signs of improvement visible… ICICI Bank is India’s second largest bank and the largest among private banks in terms of total assets. Further, the Bank has a large footprint of 4,867 domestic branches and 14,417 ATMs spread across the country.
Valuation: ICICI Bank reported remarkable improvement in its asset quality in H1FY19. We believe that the peak of NPA recognition cycle is behind and incremental addition to NPAs is expected to stay significantly lower than the previous years. Further, the bank’s liquidity positioning remains comfortable, with liquidity coverage ratio (LCR) at ~110% vs. ~90% required. We continue to like ICICI Bank given its improving B/S mix with higher contribution from granular business (Retail), strong capitalization (capital adequacy ratio of 17.8% as of H1FY19). Hence, we continue maintain our BUY rating on the stock with a revised upward target price (TP) of Rs 393 using sum of the part (SOTP) methodology, where we value its standalone business at Rs 295 (P/ABV of 1.9x for FY20E) and subsidiaries at Rs 98.
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