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Improved deposit mix to reflect in better NIMs: The bank is
executing a credible strategy of consolidation that will drive a
materially improved balance sheet and earnings quality over
the next two years. The distinguishing feature of the bank's
performance in FY2010 was the improvement in the CASA ratio
to 42% (transformative considering that the ratio was as low as
22% in FY2007 and 29% even as recently as FY2009). The ratio
further improved to 44.2% in 3QFY2011. In light of this change
in the liability mix, we expect the bank's NIMs to improve to
2.6-2.8% over FY2011 and FY2012.
Well-positioned to garner strong market share gains in CASA
deposits: In our view, the bank's substantial branch expansion
(1,508 branches added during 3QFY2008 to 2QFY2011,
including entire branch network of BoR) as well as strong capital
adequacy at 20% (tier-I at 13.7%) have positioned it to gain
market share in credit and CASA. In fact, the bank has once
again started gaining market share in savings accounts; in
FY2010, the bank improved its market share of savings deposits
by 10bp over FY2009 levels, capturing a substantial 5.4%
incremental market share.
Worst of asset quality issues over: The bank's asset quality showed
further improvement in 3QFY2011, with gross NPAs increasing
just marginally by 0.4% qoq and net NPAs declining from the
peak of `4,608cr in 1QFY2010 to `2,873cr in 3QFY2011. NPA
provisions to average assets declined to 0.5% in 3QFY2011 from
1.2% in FY2010. We expect NPA provisions to average assets to
dip to 0.4% by FY2012, driving an improvement in RoA to 1.5%.
Valuations attractive: Keeping in mind the rising interest rate
environment, ICICI Bank’s high CASA ratios and CASA market
share gains are expected to underpin relatively stronger earnings
growth momentum. We expect the bank to deliver strong earnings
CAGR of 29.7% over FY2010-12 and an ROE of 15.8% by
FY2012. At the CMP, without adjusting value of subsidiaries, the
stock is trading at 2.0x FY2012E ABV (2.1x post-adjustment).
We have valued subsidiaries at `204/share and the core Bank
at `1,108 (3.0x FY2012E ABV). We maintain a Buy on the stock,
with a Target Price of `1,312. Moreover, the bank's quarterly
earnings progression is expected to be strong, which may drive
further rerating of the stock.
SOTP valuation: Value Per Share
Core bank 1,108
Home Finance and International subsidiaries 43
Life Insurance 104
Others 57
SOTP Value 1,312
Source: Angel Research
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Improved deposit mix to reflect in better NIMs: The bank is
executing a credible strategy of consolidation that will drive a
materially improved balance sheet and earnings quality over
the next two years. The distinguishing feature of the bank's
performance in FY2010 was the improvement in the CASA ratio
to 42% (transformative considering that the ratio was as low as
22% in FY2007 and 29% even as recently as FY2009). The ratio
further improved to 44.2% in 3QFY2011. In light of this change
in the liability mix, we expect the bank's NIMs to improve to
2.6-2.8% over FY2011 and FY2012.
Well-positioned to garner strong market share gains in CASA
deposits: In our view, the bank's substantial branch expansion
(1,508 branches added during 3QFY2008 to 2QFY2011,
including entire branch network of BoR) as well as strong capital
adequacy at 20% (tier-I at 13.7%) have positioned it to gain
market share in credit and CASA. In fact, the bank has once
again started gaining market share in savings accounts; in
FY2010, the bank improved its market share of savings deposits
by 10bp over FY2009 levels, capturing a substantial 5.4%
incremental market share.
Worst of asset quality issues over: The bank's asset quality showed
further improvement in 3QFY2011, with gross NPAs increasing
just marginally by 0.4% qoq and net NPAs declining from the
peak of `4,608cr in 1QFY2010 to `2,873cr in 3QFY2011. NPA
provisions to average assets declined to 0.5% in 3QFY2011 from
1.2% in FY2010. We expect NPA provisions to average assets to
dip to 0.4% by FY2012, driving an improvement in RoA to 1.5%.
Valuations attractive: Keeping in mind the rising interest rate
environment, ICICI Bank’s high CASA ratios and CASA market
share gains are expected to underpin relatively stronger earnings
growth momentum. We expect the bank to deliver strong earnings
CAGR of 29.7% over FY2010-12 and an ROE of 15.8% by
FY2012. At the CMP, without adjusting value of subsidiaries, the
stock is trading at 2.0x FY2012E ABV (2.1x post-adjustment).
We have valued subsidiaries at `204/share and the core Bank
at `1,108 (3.0x FY2012E ABV). We maintain a Buy on the stock,
with a Target Price of `1,312. Moreover, the bank's quarterly
earnings progression is expected to be strong, which may drive
further rerating of the stock.
SOTP valuation: Value Per Share
Core bank 1,108
Home Finance and International subsidiaries 43
Life Insurance 104
Others 57
SOTP Value 1,312
Source: Angel Research
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