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EARNINGS REVIEW
ICICI Bank (ICBK.BO)
Buy Equity Research
In line with expectations; maintain Buy on reasonable valuation
What surprised us
ICICI Bank (ICBK) reported 3QFY11 net profit of Rs14.4 bn (up 31% yoy), in
line with GS expectations. Key highlights: (1) NII came in at Rs23.1 bn
(+12% yoy) on the back of stable NIMs/CASA at 2.6%/44% and advances
that grew 15% yoy. Management indicated that a delay in re-pricing its
loan book could lead to some pressure on margin in the short term.
However, we believe that over the next two years margins should expand
as ICICI Bank expands its loan book, while CASA deposit should remain
high on branch expansion; (2) Non-interest income came in 9% below GSe
due to other income being 55% below Gse – this tends to be fairly volatile
(dividend income from subs). Fees, meanwhile, grew 14% yoy; (3) Costs
came in 4% below GSe as higher employee costs (+78% yoy) were offset
by lower other expenses (16% below Gse). We have been factoring an
increase in cost ratios given expected branch expansion; (4) The muchawaited growth in credit were reflected in 3Q results. 15% yoy credit
growth was driven by domestic corporate loans (+ 57% yoy), Agri (+22%
yoy), and the international book, which has resumed its growth (+8% yoy);
(5) NPL provisions declined 28% qoq (25% below Gse) to 0.9% of average
loans vs. 1.4% in 2Q. ICBK’s gross NPLs and restructured loans remained
flat qoq, but Net NPLs declined 10% qoq; PCR was up 327 bp qoq to 71.8%.
What to do with the stock
We have fine-tuned our estimates and retain our 12-m SOTP-based price
target of Rs1,245. Maintain Buy on ICBK given reasonable valuation (standalone trades at 1.7X FY12E BVPS and 14.7X FY12E EPS), RoA expansion to
1.56% by FY2012 from 1.08% in FY2010, and high earnings CAGR of 28%.
Key risks: bulk borrowing, higher slippages
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
EARNINGS REVIEW
ICICI Bank (ICBK.BO)
Buy Equity Research
In line with expectations; maintain Buy on reasonable valuation
What surprised us
ICICI Bank (ICBK) reported 3QFY11 net profit of Rs14.4 bn (up 31% yoy), in
line with GS expectations. Key highlights: (1) NII came in at Rs23.1 bn
(+12% yoy) on the back of stable NIMs/CASA at 2.6%/44% and advances
that grew 15% yoy. Management indicated that a delay in re-pricing its
loan book could lead to some pressure on margin in the short term.
However, we believe that over the next two years margins should expand
as ICICI Bank expands its loan book, while CASA deposit should remain
high on branch expansion; (2) Non-interest income came in 9% below GSe
due to other income being 55% below Gse – this tends to be fairly volatile
(dividend income from subs). Fees, meanwhile, grew 14% yoy; (3) Costs
came in 4% below GSe as higher employee costs (+78% yoy) were offset
by lower other expenses (16% below Gse). We have been factoring an
increase in cost ratios given expected branch expansion; (4) The muchawaited growth in credit were reflected in 3Q results. 15% yoy credit
growth was driven by domestic corporate loans (+ 57% yoy), Agri (+22%
yoy), and the international book, which has resumed its growth (+8% yoy);
(5) NPL provisions declined 28% qoq (25% below Gse) to 0.9% of average
loans vs. 1.4% in 2Q. ICBK’s gross NPLs and restructured loans remained
flat qoq, but Net NPLs declined 10% qoq; PCR was up 327 bp qoq to 71.8%.
What to do with the stock
We have fine-tuned our estimates and retain our 12-m SOTP-based price
target of Rs1,245. Maintain Buy on ICBK given reasonable valuation (standalone trades at 1.7X FY12E BVPS and 14.7X FY12E EPS), RoA expansion to
1.56% by FY2012 from 1.08% in FY2010, and high earnings CAGR of 28%.
Key risks: bulk borrowing, higher slippages
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