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Roadshow feedback
We hosted the management of ICICI Bank- NS Kannan (ED and CFO) and
Rakesh Jha (Dy. CFO)- for a roadshow in UK. Management believes that
loan growth in FY12 is likely to be 20%, inline with sector and driven by
growth in corporate loans. NIMs may stay stable in FY12 and expand in
FY13, but overall profitability will improve (ROA of 1.5-1.6% and consol
ROE of 16-17% in FY13) led by fall in provisioning. Savings deposit rate
may be deregulated and banks will have to meet priority targets directly.
Targeting 20% loan growth and stable CASA ratio
Management highlighted confidence on ~20% loan growth in FY12, in line
with sector. Growth will be driven by corporate sector in India and forex loans
to Indian corporates. Retail loan growth will be driven by mortgages, but will
lag overall growth. A key change in strategy vis-à-vis past cycle is that loan
growth targets are linked closely to growth in CASA deposits and bank plans
to maintain CASA ratio near 40%. While CASA growth is a challenge for the
sector, ICICI will leverage on scale-up of recently opened branches, fresh
additions and specific targets to branches on mobilisation of deposits.
Margins to be stable in FY12 and may expand in FY13
Management was cautious on margins and believes that during FY12 they are
likely to be stable YoY at 2.6% (3% domestic and 85bps overseas); NIMs may
be under pressure in 1QFY12. NIMs may expand in FY13 led by rise in
average CASA ratio and repricing of forex assets. Improvement in pricing
environment in domestic market is a positive.
Overall asset quality stable, some stress in MFI loans
Management sees limited stress in bank’s corporate as well as retail loans. It
highlighted that its exposure to some risky sectors like aviation, real estate,
power and telecom are well secured and are unlikely to see high stress in the
coming years. However, the exposure to MFIs (Rs10bn, 0.5% of loans) is
likely to face pressure and management expects that the exposure in Andhra
Pradesh (Rs2bn, 0.1% of loans) may become NPA or be restructured.
Focus on profitability, well funded for 2-3 years
Management is expects ROA to improve to 1.5-1.6%, led by stable margins
and lower loan loss provisions. Rise in leverage and high ROA will support
expansion in ROE. With Tier I ratio of 13%, the bank is well funded to drive
growth over the next 2-3 years.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Roadshow feedback
We hosted the management of ICICI Bank- NS Kannan (ED and CFO) and
Rakesh Jha (Dy. CFO)- for a roadshow in UK. Management believes that
loan growth in FY12 is likely to be 20%, inline with sector and driven by
growth in corporate loans. NIMs may stay stable in FY12 and expand in
FY13, but overall profitability will improve (ROA of 1.5-1.6% and consol
ROE of 16-17% in FY13) led by fall in provisioning. Savings deposit rate
may be deregulated and banks will have to meet priority targets directly.
Targeting 20% loan growth and stable CASA ratio
Management highlighted confidence on ~20% loan growth in FY12, in line
with sector. Growth will be driven by corporate sector in India and forex loans
to Indian corporates. Retail loan growth will be driven by mortgages, but will
lag overall growth. A key change in strategy vis-à-vis past cycle is that loan
growth targets are linked closely to growth in CASA deposits and bank plans
to maintain CASA ratio near 40%. While CASA growth is a challenge for the
sector, ICICI will leverage on scale-up of recently opened branches, fresh
additions and specific targets to branches on mobilisation of deposits.
Margins to be stable in FY12 and may expand in FY13
Management was cautious on margins and believes that during FY12 they are
likely to be stable YoY at 2.6% (3% domestic and 85bps overseas); NIMs may
be under pressure in 1QFY12. NIMs may expand in FY13 led by rise in
average CASA ratio and repricing of forex assets. Improvement in pricing
environment in domestic market is a positive.
Overall asset quality stable, some stress in MFI loans
Management sees limited stress in bank’s corporate as well as retail loans. It
highlighted that its exposure to some risky sectors like aviation, real estate,
power and telecom are well secured and are unlikely to see high stress in the
coming years. However, the exposure to MFIs (Rs10bn, 0.5% of loans) is
likely to face pressure and management expects that the exposure in Andhra
Pradesh (Rs2bn, 0.1% of loans) may become NPA or be restructured.
Focus on profitability, well funded for 2-3 years
Management is expects ROA to improve to 1.5-1.6%, led by stable margins
and lower loan loss provisions. Rise in leverage and high ROA will support
expansion in ROE. With Tier I ratio of 13%, the bank is well funded to drive
growth over the next 2-3 years.
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