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UBS Investment Research
ICICI Bank
S trong quarter
Event: Results in line with estimates: margin fared better
ICICI Bank reported Q4 profit of Rs14.5bn +44%y/y in line with UBSe while
slightly below consensus. NIM improvement of 10bps supported strong NII growth
and offset the negative impact of MTM loss in treasury line. Other key highlights
1) CASA improved 90bp to 45.1%, 2) asset quality stayed strong coverage ratio
up to 76%, 3) Core fee income grew 18%y/y 4) Subs performance mixed
Impact: NIM improvement led to earnings upgrade
Better than expected margins has led to earnings upgrade of 1%/3% in FY12/13
respectively. We expect margins to improve by 30bps to 2.9% in FY12-13
considering improvement in international margins, reduction in securitisation
losses and improvement in liability profile.
Action: Maintain price target at Rs1350
We expect EPS CAGR of 25% in FY11-13E with core RoE of 15% in FY13 on the
back of sustained margin improvement and lower credit cost. We maintain Our PT
of Rs 1350 and Buy rating on the stock
Valuation: Reiterate Buy, Our preferred pick
We value the company on sum of the part method. At our price target of Rs1350,
the standalone business trades at 2.5x FY12 book and 18x standalone earnings. We
value its subsidiaries at Rs320 per share. We are neutral on the sector and ICICI
remains our preferred pick in the sector
Subsidiaries performance review
Subsidiary performance during q4 was mixed with life insurance subs sustaining
its accounting profitable, while non-life reported a loss during Q4. The
consolidated net profit stood at Rs 15.7bn up 17% y/y, -23%q/q. In the quarter,
non life business had to book additional provision of Rs2.7bn on account of
change in regulatory requirement related to third party motor pool loss sharing
(ratio got enhanced to 153% from 122-127%).
ICICI Bank UK reported flat net profit of $36.6mn in FY11. The asset book
shrunk 9% q/q during the quarter to $6.4bn. The book has been shrinking
strategically in response to regulators requirement of increased local lending.
Loan book represents 56% of the assets and India Linked Investments were at
$256mn down 10%q/q. Retail deposit represents 77% of total deposits which
stood at $4.2bn. The subsidiaries CAR improved 9bp q/q to 23.1%
ICICI Bank Canada reported 8%y/y decline in net profit to CAD32.4mn in
FY11. Assets declined 4%y/y to CAD4.5bn primarily due to run down in the
loan book in response to regulatory requirement. Deposits stood at CAD3.3bn
with demand deposit representing 16% of the book. The subsidiaries CAR stood
at 26.3%.
ICICI Prulife made net profit of Rs3bn -13% q/q in Q4 due to higher expense
ratio during the quarter. Its retail APE (as per IRDA nos) declined 28% in FY11
due to changed regulations. NBAP margin fell to 17.9% in FY11, while it
touched 15.6% in Q4FY11. Company reported expense ratio stood at 17.3% for
FY11.
ICICI Bank
ICICI Bank is the largest private sector bank and the second largest bank in
India. It has an asset base of Rs3.66trn. The bank had a network of 1,520
branches at the end of October 2009.
Statement of Risk
We believe a sustained economic slowdown could impact the banking and
finance sector on several fronts: lead to a slowdown in credit, increase NPL risk,
impact fee income, and exert pressure on NIM.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
ICICI Bank
S trong quarter
Event: Results in line with estimates: margin fared better
ICICI Bank reported Q4 profit of Rs14.5bn +44%y/y in line with UBSe while
slightly below consensus. NIM improvement of 10bps supported strong NII growth
and offset the negative impact of MTM loss in treasury line. Other key highlights
1) CASA improved 90bp to 45.1%, 2) asset quality stayed strong coverage ratio
up to 76%, 3) Core fee income grew 18%y/y 4) Subs performance mixed
Impact: NIM improvement led to earnings upgrade
Better than expected margins has led to earnings upgrade of 1%/3% in FY12/13
respectively. We expect margins to improve by 30bps to 2.9% in FY12-13
considering improvement in international margins, reduction in securitisation
losses and improvement in liability profile.
Action: Maintain price target at Rs1350
We expect EPS CAGR of 25% in FY11-13E with core RoE of 15% in FY13 on the
back of sustained margin improvement and lower credit cost. We maintain Our PT
of Rs 1350 and Buy rating on the stock
Valuation: Reiterate Buy, Our preferred pick
We value the company on sum of the part method. At our price target of Rs1350,
the standalone business trades at 2.5x FY12 book and 18x standalone earnings. We
value its subsidiaries at Rs320 per share. We are neutral on the sector and ICICI
remains our preferred pick in the sector
Subsidiaries performance review
Subsidiary performance during q4 was mixed with life insurance subs sustaining
its accounting profitable, while non-life reported a loss during Q4. The
consolidated net profit stood at Rs 15.7bn up 17% y/y, -23%q/q. In the quarter,
non life business had to book additional provision of Rs2.7bn on account of
change in regulatory requirement related to third party motor pool loss sharing
(ratio got enhanced to 153% from 122-127%).
ICICI Bank UK reported flat net profit of $36.6mn in FY11. The asset book
shrunk 9% q/q during the quarter to $6.4bn. The book has been shrinking
strategically in response to regulators requirement of increased local lending.
Loan book represents 56% of the assets and India Linked Investments were at
$256mn down 10%q/q. Retail deposit represents 77% of total deposits which
stood at $4.2bn. The subsidiaries CAR improved 9bp q/q to 23.1%
ICICI Bank Canada reported 8%y/y decline in net profit to CAD32.4mn in
FY11. Assets declined 4%y/y to CAD4.5bn primarily due to run down in the
loan book in response to regulatory requirement. Deposits stood at CAD3.3bn
with demand deposit representing 16% of the book. The subsidiaries CAR stood
at 26.3%.
ICICI Prulife made net profit of Rs3bn -13% q/q in Q4 due to higher expense
ratio during the quarter. Its retail APE (as per IRDA nos) declined 28% in FY11
due to changed regulations. NBAP margin fell to 17.9% in FY11, while it
touched 15.6% in Q4FY11. Company reported expense ratio stood at 17.3% for
FY11.
ICICI Bank
ICICI Bank is the largest private sector bank and the second largest bank in
India. It has an asset base of Rs3.66trn. The bank had a network of 1,520
branches at the end of October 2009.
Statement of Risk
We believe a sustained economic slowdown could impact the banking and
finance sector on several fronts: lead to a slowdown in credit, increase NPL risk,
impact fee income, and exert pressure on NIM.
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