ICICI Bank

ICICI Bank becoming attractive at sub 1000 levels...last 2 days closing at 980 & 984...the last time it closed below 1000 was in early April...
Yes, but provided you have a 2 year+ horizon. For short term bounce backs smaller banks may be better.

How is it attractive?

PE is still above 30.

Can you please share why you think its attractive?

According to moneycontrol.com, the PE is just 13.
Even that is based on standalone numbers. Consolidated EPS for FY13 was around 83. Based on that PE is around 11.5.

These is a case for investing in private banks if they go lower. What do you feel Alchemist?
P/E is meaningless for Banks anyways, two ratios which are most relevant for Banks are Price/Book and Return on Assets.

ICICI with a P/B of 1.6 sure looks attractive.

https://www.edelweiss.in/company/ICICI-Bank-Ltd/company-fundamental-comparision/5418.html

Both ICICI and HDFC Bank is not only a play on their banking forays but consolidated book holding Bank+ Insurance(General +Life) + Mutual Fund AMC+ Securities.

However, asset quality is still a concern for ICICI or AXIS and hence they get priced in much lower than a HDFC.

For short term bounce back, IndusInd or Yes Bank can be better bets as they have corrected significantly.
 
Yes you are right. But P/E is composed of P/B and ROE. So it is not totally meaningless.

Yes Bank has been talking about raising capital. If the price keeps falling it might make it difficult for it to do so. Need to look more into IndusInd.

Axis Bank which raised capital recently at 1500 may be better position and at lower levels asset quality concerns would be priced in. Already below 10 PE and also at P/B of 1.6.

But if Yes Bank falls significantly it might be a great buy with its superior growth and higher ROE.

Also banking being such a homogenous business, the best approach might be buy a basket of good private banks unless one becomes ridiculously undervalued due to temporary issues.
 
Yes you are right. But P/E is composed of P/B and ROE. So it is not totally meaningless.
P/E being Market Cap/PAT,
P/B being Market Cap/Networth,
ROE being PAT/Networth

So in effect, P/B = P/E * ROE, so in effect focusing on P/B automatically takes into care the price as well as RoE.

Again RoE = RoA * Leverage. Hence, focusing on RoA helps us to eliminate comparatively higher leverage and focus on true returns.

Also apart from the theory part, Banks need to maintain higher capital adequacy ratios, thus the networth guides us to what extent the future profit growth is sustainable without diluting further equity.

For example: A bank quoting a very high P/B arising from a low P/E and very high RoE jacked up by extreme leverage is a dangerous bet and should be avoided.
 
Technically, it's best to stay away from banks for a while. The Bank Nifty is sitting on a very important support level which has been holding for the past 3 days. Once it cracks, the Bank Nifty will enter an intermediate term downtrend.



Interestingly, ICICI's major support levels have been broken. Nevertheless, if the BN's support holds, it will put up ICICI from the free fall.
 

Alchemist

Administrator
Staff member
Technically, it's best to stay away from banks for a while. The Bank Nifty is sitting on a very important support level which has been holding for the past 3 days. Once it cracks, the Bank Nifty will enter an intermediate term downtrend.
So has the support been broken?

What is your next target?
 
So has the support been broken?

What is your next target?
Yup. Let's see today's close though.

As it enters an intermediate term downtrend, I am not sure of the ultimate targets but the next immediate swing support should be around 9800 (technical support) -10,000 (psychological support).
 

Alchemist

Administrator
Staff member
This question doesn't suits you? You are a chart guru. How come you are not checking your charts?
I am no guru and am often wrong, so getting a second opinion is always better.

Besides that Chartnexus has only 3 years of data and that makes taking medium and long term views a bit difficult, especially while trying to find long term supports for falling stocks and indices.
 

Atiker

Active member
There is something fundamentally wrong in icici's dna.

It has consistently performed worse than hdfc, corporate should be smart enough to learn from what the winners are doing.

ICICI is not a family or an individual owned company. They don't have a dearth of money to hire the top talent.
 

Alchemist

Administrator
Staff member
Past two to three days, there are lot of news about ICICI bank for wrong reasons.

Chanda Kochhar 'a huge beneficiary' of Videocon loan, says whistleblower

How do see the stock would react to this news. For sure negative but how low does it go?

Sadly, I have an exposure to ICICI bank stock :frown:.
The transactions are obviously very questionable.

I am not disappointed because one person at the top is involved, but because the entire top management of the bank is trying to defend that person.

I have no trust left in the top management of the bank.
 

Alchemist

Administrator
Staff member
For those who are confused about the various transactions mentioned, let me highlight the most significant details.

Dhoot-owned company Supreme Energy invested Rs 64 crore in Deepak Kochhar's company.

Supreme energy was then transferred to Deepak Kochhar's trust (via Mahesh Chandra Punglia). This transfer valued Supreme Energy at a mere Rs 9 lakhs.

I still haven't looked at Supreme Energy's balance sheet, but I doubt a company that invested Rs 64 crore in Kochhar's company has equity value of a mere Rs 9 lac.
 

Alchemist

Administrator
Staff member
Whether or not Deepak Kochhar’s business relations with Dhoot helped facilitate ICICI Bank’s loan to Videocon only a detailed investigation can establish. What’s not in doubt is a clear conflict of interest and the bank’s seeming reluctance to get to the bottom of it. A knee-jerk press release in defence of Chanda Kochhar and talking assurances by the bank’s board do not make for an credible institutional response. In fact, it only undermines the bank’s leadership.
Matter of mistrust | The Indian Express
 
Top