ICICI Bank Ltd - Research Report


Private Client Research




Bank - Private


ICICI Bank Ltd

Reco Price
Rs. 300.50
Price Target (1 Year)
Rs. 361.00


May 09, 2017
CNX Nifty




Improving business environment with bank focus to reduse exposure towards stressed segments would improve ROA of bank.

Bank is reducing its exposure towards stressed segments:
Majority of stressed assets belong to 5 different sectors including power, iron & steel, mining, cement and rigs. The bank have been cautiously shifting their focus to non-stressed assets, reducing their exposure from 16% in FY12 to 11.9% in FY17. The bank had created a watch-list of stressed assets in FY16, which was at Rs 44000 crores, and they were the sectors from where the stress is expected to emanate. With various initiatives taken by bank the watch-list is already down to Rs 32500 crores. The bank’s focus is on earnings quality, and for the same, it is working on the resolution of these stressed exposures, which would yield results over a few quarters.

Stronger retail business and still growing:
Retail business matrix remains healthy, with CASA ratio of 41%+, contribution to fees at 65%+, higher share of secured loans (~90% of retail loans), and NNPA ratio of ~65bps. Structural improvements in liability and ALM profile over past few years have helped ICICI bank to gradually improve NIM to 3.1%+, despite increasing competition within the retail business, low-risk corporate loans and falling interest rate scenario. Continued mix shift will help to mitigate pressure on domestic margins. Near-term business growth will be driven by the retail business. The share of high-profit-making products (mainly by cross-sell), such as credit cards, personal loans and business banking, is likely to increase.

Second largest private bank with PAN India presence:
The bank has a network of 4850 branches and 14404 ATMs in India, and has a presence in 19 countries including India. It offers a wide range of banking products and financial services for corporate and retail customers through a variety of delivery channels and specialized subsidiaries in the areas of investment banking, life, non-life insurance, venture capital and asset management.

Value unlocking of subsidiaries:
ICICI Bank plans to sell 12.7% stake in ICICI Prudential Life Insurance Company Ltd. (ICICI Life), its subsidiary, through an offer for sale (OFS) in FY17. It may fetch close to Rs. 4150 crores to the bank if we valued ICICI Life business at 2.4x trailing embedded value (EV) of FY16. ICICI Life received similar valuation in a previous deal when ICICI Bank sold its 6% stake of ICICI Life for Rs. 1950 crores in December 2015. However, considering recent increasing interest in the insurance business and first IPO by any Indian insurance firm, we believe that ICICI Bank may fetch anywhere in the range of Rs. 4150-6750 crores through this OFS valuing ICICI Life at 2.2- 3.8x trailing EV of FY16. Besides, ICICI bank also plans to sell 100% stake in Home Finance Company (HFC), another one of its subsidiaries, which may fetch anywhere in the range of Rs. 2200-2500 crores to the bank. We believe that proceedings from these stake sales of subsidiaries will aid the bank in creating additional buffer against stressed assets.

Stock Data

CMP (Rs)
Face value (Rs)
52 Week Range (Rs)
308.15 - 217.70
Market cap (Rs Crores)
Price To Book Value (x)
P/E Ratio

One Year indexed Stock Performance

ICICI Bank LtdSensex
ICICI Bank Ltd
Return (%)


(in %)

+91 22 6639 3000



The Indian banking system consists of 26 public sector banks, 25 private sector banks, 43 foreign banks, 56 regional rural banks, 1589 urban cooperative banks and 93550 rural cooperative banks. Total Indian banking sector assets reached $1.96 Trillion in FY15 from $1.3 Trillion in FY10, with over 70% accounted for by the public sector.


ICICI Bank is India's largest private sector bank with total assets of Rs. 7206.95 Billion ($109 Billion) at March 31, 2016 and a PAT of Rs. 97.26 Billion ($1468 Million) for the year ended March 31, 2016. ICICI Bank currently has a network of 4850 Branches and 14404 ATMs across India.

Profit & Loss Statement:- (Consolidated)
(Rs Crores)
Mar 15
Mar 16
Mar 17
Mar 18E
Mar 19E
  • Interest Earned
  • Other Income
  • Total Income
  • Growth (%)
  • Interest Expended
  • Operating Expenses
  • Total Expenditure
  • Operating profit before Prov. & Cont.
  • Exceptional Items
  • Provisions & Contingencies
  • PBT
  • TAX
  • Profit After Tax
  • Diluted EPS
  • 54,964.00
  • 35,252.24
  • 90,216.24
  • -
  • 32,318.15
  • 35,022.71
  • 67,340.86
  • 22,875.38
  • 0.00
  • 4,536.34
  • 18,339.04
  • 5,396.73
  • 12,942.31
  • 21.13
  • 59,293.71
  • 42,102.14
  • 101,395.85
  • 12.4%
  • 33,996.47
  • 40,789.56
  • 74,786.03
  • 26,609.82
  • 0.00
  • 12,305.40
  • 14,304.42
  • 3,377.52
  • 10,926.90
  • 17.51
  • 60,939.98
  • 52,457.65
  • 113,397.63
  • 11.8%
  • 34,835.83
  • 48,169.97
  • 83,005.80
  • 30,391.83
  • 0.00
  • 16,582.48
  • 13,809.35
  • 2,469.02
  • 11,340.33
  • 17.49
  • 69,229.25
  • 56,642.12
  • 125,871.37
  • 11.0%
  • 35880.905
  • 55395.466
  • 91,276.37
  • 34,595.00
  • 0.00
  • 19069.852
  • 15,525.15
  • 3,105.03
  • 12,420.12
  • 19.16
  • 76,498.32
  • 62,589.54
  • 139,087.86
  • 10.5%
  • 36885.57
  • 63704.785
  • 100,590.36
  • 38,497.51
  • 0.00
  • 21930.33
  • 16,567.18
  • 3,313.44
  • 13,253.74
  • 20.44
Source: Stockaxis Research, Company Data


The stock is trading at a cheaper valuation in terms of P/ABV which is currently at 1.44x FY 2018E considering Adjusted Book Value of Rs 207.37.

We consider a valuation of 1.74x FY2018E in terms of P/ABV which is a fair multiple that ICICI Bank can have in a relatively better business environment. Hence we recommend a BUY for ICICI Bank with price target of Rs 361 with a long term horizon.



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