ICICI BANK: TAKING THE THE LEAP OF FAITH:

T Ashwin Kumar
Finance Professional

For the last few years ,the banking sector has not been a favoured sector of investors for evident reasons.
Many mainstream banks have been saddled with bad assets which have accumulated for various reasons in
their Balance Sheet over the years. Though primarily the Govt Banks are the mainly affected , private banks
having large exposures to Project Finance have also been hit by this.
The Reserve Bank of India has now clearly stated that all Banks come out with the true position of their
Stressed Assets and Non-performing assets in the Dec 2015 and the March 2016 quarters. This is the last
chance for all the naughty boys to show what they have been hiding under their desks to their principal Mr
Raghuram Rajan.
So I compare these critical moments which are facing these Bankers with the climax scene of the movie
Indiana Jones & the Last crusade and try to show you why ICICI Bank may finally reach the holy grail like
Indy aka Harrison Ford.
Scene 1 : Sean Connery is shot - Indian Jones has to get to the grail to save everything. Similarly the market
has just beaten down ICICI Bank to near its book value and its brand value built over so many years is being
questioned in this one test. At a price of around 220 Rs - 11 times historic P/E and 1.5 times book value you
could take a shot.
Scene 2 : The swinging blade - One needs to bend to the dictates of God. In case of banks , well, the RBI is
like God. Many public sector banks have not acknowledged their real NPA levels and soon RBI will decide
the future of the banks and their management and it shall not be good. Whereas ICICI Bank has deferred to
RBI and declared all their problems in their results today. Probably their stock would open down 5%
tomorrow but they have bent in all humility before RBI unlike other large banks who may be cut to size !!!
Scene 3 : Spelling it right - ICICI Bank started off badly with their bad project loans accumulating and
affecting their capability to grow as fast as their main competitor HDFC Bank . While one could argue that
project finance as a business has been affected negatively in India and ICICI Bank because of their legacy
as a Financial Institution has the baggage of project finance- based bad loans, one cannot take away the fact
that HDFC Bank has been the leader in reading credit and has clearly beaten everyone else in this game.
But after those initial mistakes, I think ICICI Bank has found the right track under the leadership of Ms
Chanda Kochhar. While the results may not be there immediately , I see signs of change where gradually
they do improve on spelling credit rightly
Scene 4 : The Leap from the Lions Head - You should have faith my son !! said Sean Connery in the movie.
So having come so far we still have this well of doubt if things could become more worse than this ? Well I
would repeat what Indy Senior said and would also say that perhaps you could take this leap of faith and
buy ICICI Bank at this valuation. If you take that leap what could protect you would be a Stress test done by
the Reserve Bank of India last year which has classified ICICI Bank as a systemically important bank for

the Indian economy. Now you see it , don't you -faith can do great things so you have that glass floor of RBI
protecting this too big to fail institution which shall protect you on the downside.
With the above dramatic introduction , I would submit that you could consider adding ICICI Bank to your
portfolio after this fall in its price where the margin of safety is very reasonable by taking a leap of faith as I
have done.