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● ICICI’s 1Q profits (+30% YoY) were as expected (4% lower vs
street). Both loan growth at 21% YoY (18-19% guidance for full
year) and NIMs at 2.6% (-10 bp QoQ) were in line with estimates.
Disappointment during 1Q was modest (+6%) growth in fees (core
fee +12% YoY) and as these have started to lag loan growth,
ROAs moderating during the quarter from 4Q levels.
● Consol profits (+53% YoY) were 25% higher than standalone, as
slowdown in new business (-41% YoY) is aiding a sharp rise in life
insurance a/c profits. However, with NBAP down 68% YoY, we
expect little embedded value growth.
● Asset quality was stable but provisions up 18% QoQ to meet new
RBI norms. Rapid increase in bank’s exposure to infra and real
estate sectors given headwinds faced by many of these highly
leveraged corporates may weigh on stock performance.
● We believe, with little upside to ROA as credit costs have likely
bottomed and valuations at 2.1x FY12 core book (core ROE
14%), stock offers limited upside and maintain NEUTRAL.
No surprises in the operating performance
Corp loans remained a key driver, contributing 170% of incremental
domestic lending in 1Q (54% of incremental share over past year).
Retail growth remained weak (down 1% QoQ; +8% YoY) and is
currently at 37% of loans. Deposit growth was in line with loan growth
(2% QoQ).
NIMs held up well but fees growth dropped
While reported CASA share dropped 320 bp QoQ to 42% (savings
deposits growth at 18% YoY) mainly due to outflow of seasonal
current a/c deposits, average CASA was stable at 40%. NIMs
therefore fell only 10 bp QoQ to 2.6% as expected (domestic NIMs at
3.0%, int’l NIMs at 0.9%). The bank expects FY12 NIMs at around
2.6% levels. The disappointment during the quarter was the modest
(+6% YoY) growth in fees (core fee were 12% YoY) driven by weak
distribution and slowdown in corporate activities. Cost-income was up
216 bp QoQ to 45% with revision in base salaries.
Consol profits boosted by life insurance accounting profits
Consol 1Q profits (+53% YoY) were 25% higher than standalone
profits, as slowdown in new business (-41% YoY) is aiding a sharp
rise in life insurance a/c profits (Rs3.4 bn profit in 1Q12 vs. Rs1.2 bn
loss in 1Q11). However, with new business premiums falling and
margins under pressure, NBAP was down 68% YoY and we expect
little embedded value growth at the life insurance business.
Credit costs may have bottomed, likely headwinds on corp
loans
Gross NPLs were largely unchanged but provisions up 18% QoQ as
expected (credit costs 0.8%) due to Rs1.5 bn additional provisions to
meet new RBI norms. However, post rapid increase in bank’s exposure
to sectors such as real estate and infrastructure and headwinds being
faced by many such highly leveraged corporates, we expect newsflow,
for instance its yesterday’s acquisition of the 30% pledged stock of
telecom infra co. GTL, to weigh on the bank’s stock performance as it
highlights its relatively large exposure to these sectors.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
● ICICI’s 1Q profits (+30% YoY) were as expected (4% lower vs
street). Both loan growth at 21% YoY (18-19% guidance for full
year) and NIMs at 2.6% (-10 bp QoQ) were in line with estimates.
Disappointment during 1Q was modest (+6%) growth in fees (core
fee +12% YoY) and as these have started to lag loan growth,
ROAs moderating during the quarter from 4Q levels.
● Consol profits (+53% YoY) were 25% higher than standalone, as
slowdown in new business (-41% YoY) is aiding a sharp rise in life
insurance a/c profits. However, with NBAP down 68% YoY, we
expect little embedded value growth.
● Asset quality was stable but provisions up 18% QoQ to meet new
RBI norms. Rapid increase in bank’s exposure to infra and real
estate sectors given headwinds faced by many of these highly
leveraged corporates may weigh on stock performance.
● We believe, with little upside to ROA as credit costs have likely
bottomed and valuations at 2.1x FY12 core book (core ROE
14%), stock offers limited upside and maintain NEUTRAL.
No surprises in the operating performance
Corp loans remained a key driver, contributing 170% of incremental
domestic lending in 1Q (54% of incremental share over past year).
Retail growth remained weak (down 1% QoQ; +8% YoY) and is
currently at 37% of loans. Deposit growth was in line with loan growth
(2% QoQ).
NIMs held up well but fees growth dropped
While reported CASA share dropped 320 bp QoQ to 42% (savings
deposits growth at 18% YoY) mainly due to outflow of seasonal
current a/c deposits, average CASA was stable at 40%. NIMs
therefore fell only 10 bp QoQ to 2.6% as expected (domestic NIMs at
3.0%, int’l NIMs at 0.9%). The bank expects FY12 NIMs at around
2.6% levels. The disappointment during the quarter was the modest
(+6% YoY) growth in fees (core fee were 12% YoY) driven by weak
distribution and slowdown in corporate activities. Cost-income was up
216 bp QoQ to 45% with revision in base salaries.
Consol profits boosted by life insurance accounting profits
Consol 1Q profits (+53% YoY) were 25% higher than standalone
profits, as slowdown in new business (-41% YoY) is aiding a sharp
rise in life insurance a/c profits (Rs3.4 bn profit in 1Q12 vs. Rs1.2 bn
loss in 1Q11). However, with new business premiums falling and
margins under pressure, NBAP was down 68% YoY and we expect
little embedded value growth at the life insurance business.
Credit costs may have bottomed, likely headwinds on corp
loans
Gross NPLs were largely unchanged but provisions up 18% QoQ as
expected (credit costs 0.8%) due to Rs1.5 bn additional provisions to
meet new RBI norms. However, post rapid increase in bank’s exposure
to sectors such as real estate and infrastructure and headwinds being
faced by many such highly leveraged corporates, we expect newsflow,
for instance its yesterday’s acquisition of the 30% pledged stock of
telecom infra co. GTL, to weigh on the bank’s stock performance as it
highlights its relatively large exposure to these sectors.
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