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ICICI Bank (ICBK.BO)
Buy Equity Research
Below expectation on MTM hit, core on track, retain Buy
Core on track, though MTM hit on securities receipt a negative
ICICI Bank reported net profit of Rs14.5 bn for 4QFY2011 (up 44% yoy, 6%
below GSe). Key positives: (1) NII grew 23% yoy (3% ahead of GSe), as the
bank increased its CASA ratio to 45% (42% last year, 44% in 3Q), likely
leading to the 10bp expansion in margin to 2.7%, and the loan book grew
19% yoy, 5% qoq. We expect 14bp expansion in margin yoy in FY2012
despite the rising rate on international book repricing and the focus on
CASA. (2) The retail loan book has stopped declining and was up 6% qoq,
7% yoy accounting for 38% of its loans. IBank should deliver over 20% loan
growth in FY2012. (3) Fee income was in line, while expenses too remained
under control. (4) Bank gross, net NPL and restructured loans all declined
qoq to 4.5%, 1.1% and 0.9% from 4.8%, 2.6% and 1.24% respectively which
meant the bank had to make lower provisions of Rs3.8 bn vs Rs4.6 bn in the
3Q. Key negatives: the bank continues to book a MTM hit on its securities
receipt portfolio (Rs1bn in 4Q, Rs2.3bn in FY2011), but management expects
this to phase out, with one more year of potential MTM in FY2012.
What to do with the stock
We have lowered our estimates for FY2012 and FY2013 (by 0.6% and 4.5%
respectively). Given our macro view of further tightening we believe the
bank will likely see lower expansion in margin vs our earlier estimates.
Post adjustment for its dividend pay-out (which is marginally higher) we
have lower our 12-mth SOTP target price to Rs1,235 (Rs1,245 earlier). We
retain our Buy rating on ICICI Bank given the high RoA of 1.5%, earnings
growth of 28% in FY2012 and 21% in FY2013, whilst the stock trades at
1.8X PBR standalone entity. Key risks: bulk borrowing, higher slippages.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ICICI Bank (ICBK.BO)
Buy Equity Research
Below expectation on MTM hit, core on track, retain Buy
Core on track, though MTM hit on securities receipt a negative
ICICI Bank reported net profit of Rs14.5 bn for 4QFY2011 (up 44% yoy, 6%
below GSe). Key positives: (1) NII grew 23% yoy (3% ahead of GSe), as the
bank increased its CASA ratio to 45% (42% last year, 44% in 3Q), likely
leading to the 10bp expansion in margin to 2.7%, and the loan book grew
19% yoy, 5% qoq. We expect 14bp expansion in margin yoy in FY2012
despite the rising rate on international book repricing and the focus on
CASA. (2) The retail loan book has stopped declining and was up 6% qoq,
7% yoy accounting for 38% of its loans. IBank should deliver over 20% loan
growth in FY2012. (3) Fee income was in line, while expenses too remained
under control. (4) Bank gross, net NPL and restructured loans all declined
qoq to 4.5%, 1.1% and 0.9% from 4.8%, 2.6% and 1.24% respectively which
meant the bank had to make lower provisions of Rs3.8 bn vs Rs4.6 bn in the
3Q. Key negatives: the bank continues to book a MTM hit on its securities
receipt portfolio (Rs1bn in 4Q, Rs2.3bn in FY2011), but management expects
this to phase out, with one more year of potential MTM in FY2012.
What to do with the stock
We have lowered our estimates for FY2012 and FY2013 (by 0.6% and 4.5%
respectively). Given our macro view of further tightening we believe the
bank will likely see lower expansion in margin vs our earlier estimates.
Post adjustment for its dividend pay-out (which is marginally higher) we
have lower our 12-mth SOTP target price to Rs1,235 (Rs1,245 earlier). We
retain our Buy rating on ICICI Bank given the high RoA of 1.5%, earnings
growth of 28% in FY2012 and 21% in FY2013, whilst the stock trades at
1.8X PBR standalone entity. Key risks: bulk borrowing, higher slippages.
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