ICICI Bank Trading Lookout | Trade Nivesh

After dipping significantly in 3Q, slippages were up ~70% QoQ to ~Rs 35.5bn i.e.2.47% vs. 1.5% QoQ. This incl. an exposure of ~Rs 8.5bn to Renuka Sugars, which is currently servicing its debt (might be upgraded in FY20). W/Os were significantly higher at ~Rs 73.3bn (+~2.1/2.4x), leading to GNPA decline of ~10% QoQ ( Rs 463bn, 6.7%). ~69% of corp slippages were from the BB and below rated book (O/s 2.99%). The mgt guided for a spike in agri related slippages in FY20E (KCC related, 3% of the book). We have factored in slippages of ~1.95% over FY19-21E. Resolutions in NCLT cases can provide additional surprises (positive). Advances grew ~15/4%, driven by a 17% growth in domestic advances. The retail segment clocked a robust ~22/6% growth. Within retail, unsecured loans grew (43/11%) rapidly, on a small base. We have factored in a loan CAGR of 16% over FY19-21E. Overall NIMs improved ~30bps QoQ to 3.7%. The improvement was optical to the extent of ~25bps, as NII included int. on IT refund of ~Rs 4.1bn. Ex., the one-off, NIMs improved ~7bps QoQ led by a yield expansion and contained CoF . Further this was, despite a 200bps drop in the domestic CD ratio. We have assumed NIMs of 3.45% over FY19-21E.
While slippages for the qtr were higher vs. expected, the overall stress declined, keeping the bank’s prospects remain largely unchanged. Maintain (2.0x Mar-21 core ABV of Rs 172 and sub-value of Rs 109).
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