‘Buy’ rating for ICICI Bank, target price Rs 340: Kotak

Key annual report takeaways — corporate book reported a loss due to high loan loss provisions, deterioration increased in the corporate portfolio but the bank is addressing this risk as the share of exposures is not rising but falling in select sectors, retail continues to do exceptionally well in terms of growth, profitability and impairment levels, progress of international subsidiaries are on the right track as India-related exposures have declined. Maintain ‘buy’ with TP at Rs 340 (from Rs 320 earlier).

FY16 was a watershed year for the corporate portfolio as it reported a loss at PBT level due to weak revenue growth and high provisions while the retail segment delivered for the seventh consecutive year post solid revenue growth of 23% y-o-y while PBT grew 43% y-o-y. The contribution from the treasury was the highest we have seen in recent years as it was led by gains from the partial sale of both insurance ventures of the bank. It does appear that this trend is unlikely to change in FY17 though prospects beyond this period could reverse as the pressure on corporate loan portfolio eases.

Most subsidiaries showed weak performance as earnings declined 7% y-o-y though the parent did enjoy higher dividend payout ratios from these businesses. UK and Canada saw sharp drops in earnings led by higher provisions for bad loans, especially for the India exposure. However, we note that the share of India businesses in these two subsidiaries continued to decline as it is not as high as FY09-13 levels.

ICICI Bank