Angel Broking: ICICI Bank (CMP: Rs.1,127/ TP: Rs.1,350/ Upside: 20%)

ICICI Bank (CMP: Rs.1,127/ TP: Rs.1,350/ Upside: 20%)

􀂄 The Bank is well-positioned to gain CASA market share on the back of substantial
branch expansion from 955 in 3QFY2008 to 2,016 in 1QFY2011 as well as credit
market share on the back of strong Capital Adequacy at 20.2% (Tier-I at 14.0%).
􀂄 Net Interest Margins of the Bank are expected to sustain on the back of increase in
CASA ratio to 42.1% in 1QFY2011 from 29% in FY2009.
􀂄 On the back of an improving economic environment, NPA losses are expected to
start declining. The Bank has also done lower restructuring of loans than PSU
Banks (7.1% of Net Worth v/s 40%+ for most PSU Banks). As a result, we expect
NPA provisions /Assets to decline sharply to 0.5% by FY2012E (from 1.2% in
FY2010)
􀂄 We expect the bank to deliver strong earnings CAGR of 31.0% over FY2010-12E
and a ROE of 15.5% by FY2012E vs. 9.7% in FY2010. The stock is trading at
attractive valuations of 2.3x FY2012E P/ABV on a standalone basis. Hence, we
maintain a Buy on the stock with a Target Price of Rs1,350 valuing the core bank
at 2.9x FY2012E P/ABV and assigning a value of Rs254 for its subsidiaries.