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ICICI Bank hits record high, but this rally isn’t over yet!

Staff reporter, New Delhi
12/03/2019   0 Comments

Shares of ICICI Bank shot up a cool 3.3 per cent to a record high on the BSE on Tuesday. The stock ruled at Rs 388.30, notching up solid gains in the last one month. Several brokerages appear confident about the prospects of the bank. "We believe that ICICI Bank’s liability and asset franchise have strengthened over the years with de-risking of its loan portfolio, rising market share in CASA, increased competitiveness in the cost of funds relative to peers and improving capital efficiency," said Reliance Securities in a report. The brokerage has a 'Buy' call on the stock with a target of Rs 470. 

"Valuing the bank using SOTP methodology, our target price of Rs 470 is based on 1.9x FY21E adjusted BV (rolling over from FY20E to FY21E) and value of the bank’s subsidiaries, implying an FY21 P/ABV of 2.4x. Trading at close to long term average valuations of 1.9x FY21E ABV, we believe the bank will close its discount to other private peers as concerns on credit quality abate and ROEs expand over the next two years. The stock remains our top pick in the banking space owing to attractive valuations," the brokerage added. 

Brokerage JM Financial too has a favourable view. "The bank's management indicated that the bank’s exposures to promoter financing, sensitive NBFC exposure and other stressed sectors beyond the disclosed BB and below pool are within comfort levels," the brokerage stated. 

The lender's management expects incremental loan growth to be driven by retail and SME segments, which should further be supported by a corporate credit growth recovery. The sector as a whole may face some increased competition from PSU banks. However, the impact on ICICI Bank is expected to be minimal as the SME and business banking segments contribute only nearly 8 per cent to overall advances, according to the brokerage. 

It further said the bank's management is confident of achieving RoE of 15 per cent by June 2020, driven by moderation in credit costs and an increased impetus on the pricing of loan products. With regard to the ongoing CBI probe, the management believes that the business is fully insulated and it's full cooperating with investigative authorities.

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