>ICICI Bank (UBS)

● ICICI Bank down on several concerns: Several concerns have pulled down ICICI Bank’s share price including international exposure through both Indian and international corporates, NPLs on the retail and corporate portfolios on India operations, and risk on repayment of international bonds.

● Concerns justified, but perhaps more than reflected in the price: We believe these concerns are justified but reflected in the share price. We conduct a stress test analysis to arrive at adjusted book and sum-of-the-parts assuming higher NPLs in India and international operations, and zero value for international subsidiaries. According to our analysis, the BVPS can fall around 15-30% in the stress-case scenario. Note that we assume the book value will take most of this hit, and we do not consider the hit on the profit and loss account.

● Value in stock, performance may follow global trends: ICICI Bank has significant exposure to the international market at 27% of consolidated assets, including exposure to non-Indian companies/banks at 10.6% (2.6% in cash and liquid securities). We believe this will cause the stock price to track global banking performance. We, however, find value at the current level and believe investors should invest with a 12-month view. In the stress-case scenario we estimate value for the bank at around Rs390–425 per share, higher than the current price suggests.

● Valuation maintain Buy, price target of Rs515: ICICI Bank is trading at 7.6x FY09E PE and 0.6x FY09E P/BV and ABVPS. We derive our price target of Rs515 using the residual income model.

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