Buy ICICI Bank; target of Rs 350: Axis Direct

Axis Direct's research report on ICICI Bank

We met the management of ICICI Bank (ICICIBC) to get insights of the business and outlook on asset quality. Overall loan growth will remain soft due to run-down of overseas portfolio (15% in Q1FY18 vs. 24% in Q1FY16) but robust growth in retail/SME will keep domestic loan growth strong. Decline in overseas portfolio should bottom out in Q3 while retail/SME should continue to grow at 15%+ in coming quarters.

Outlook

Incremental lending at lower yields and transition to MCLR should keep margin under pressure but expect to maintain it at +3%. Slippages in FY18 to be significantly lower vs. FY17 and should largely follow from the drilldown list while those outside the list should be limited to a couple of lumpy accounts. However, credit costs are likely to stay elevated due to ageing of NPAs and RBI directive to upfront provisions on cases referred to NCLT and select stressed sectors. Maintain BUY.

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