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ICICI Bank (ICICIBC)
Banks/Financial Institutions
Steady trends with margins and asset quality holding up well. ICICI Bank reported
steady earnings with NIMs declining only by 10 bps during the quarter. Focus on
liabilities is paying off, with average CASA sustaining at 40%, and this should improve
margins in the current high interest rate environment. Fee income growth at 12% was
slightly weak, but asset quality performance remained on track with further reduction in
gross NPLs. While we have very high comfort on its earnings for FY2012-13E, its low
RoE may keep its valuations in check. International subsidiaries continue to remain a
drag on profitability. Stock trades at 1.6X FY2013E book and 11X EPS for the parent
banking business. Retain ADD with a TP of `1,270.
Steady performance – margins, asset quality hold up well; international subs remain a drag
ICICI Bank reported a steady quarter, with key highlights being (1) margins declined by only 10 bps
to 2.6%, NII growth at 21% yoy in 1QFY12, (2) average CASA ratio steady at 40% which is
commendable in a rising rate environment, (3) fee income growth was somewhat weaker at 12%,
(4) loan growth was at 20%, 2% qoq growth and (5) asset quality improved further with net NPLs
at 1%, provision coverage at 77% with negligible net slippages.
We expect margins to improve during the course of the year, on back of its liability profile, as well
as improving international margins (currently at 90 bps). With better fee income growth and likely
lower provisions, earnings growth is expected to remain strong in FY2012-13E.
While we remain very positive on earnings, a low RoE limits upsides. RoE for FY2011 was at 9.8%,
with consolidated RoE at about 11%. We expect this to increase to 15% in FY2012-13E. We
believe that valuation expansion will largely depend on its ability to expand RoE quickly to over
15% levels. The international subsidiaries are a big drag on profitability as they are generating
RoEs of only 5%. Currently the stock trades at 1.6X FY2013E book.
Loan growth in line with industry average led by non-retail segment
ICICI Bank’s loan growth was in line with industry average at 20% yoy and 2% qoq. The
management expects loan book to grow at 18% in FY2012E mainly in secured retail lending,
infrastructure and corporate working capital. For the quarter, corporate loans grew by 45% yoy,
SME loans by 50% yoy while international loans grew by 17% yoy and retail loans by 13% yoy.
Within retail, housing loans grew by 19% yoy while housing loans grew by 16% yoy.
We expect loan book to grow by 18% CAGR in FY2012-13E driven largely by corporate loans. The
management will increase its thrust on priority sector loans as it would like to reduce the current
shortfall.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ICICI Bank (ICICIBC)
Banks/Financial Institutions
Steady trends with margins and asset quality holding up well. ICICI Bank reported
steady earnings with NIMs declining only by 10 bps during the quarter. Focus on
liabilities is paying off, with average CASA sustaining at 40%, and this should improve
margins in the current high interest rate environment. Fee income growth at 12% was
slightly weak, but asset quality performance remained on track with further reduction in
gross NPLs. While we have very high comfort on its earnings for FY2012-13E, its low
RoE may keep its valuations in check. International subsidiaries continue to remain a
drag on profitability. Stock trades at 1.6X FY2013E book and 11X EPS for the parent
banking business. Retain ADD with a TP of `1,270.
Steady performance – margins, asset quality hold up well; international subs remain a drag
ICICI Bank reported a steady quarter, with key highlights being (1) margins declined by only 10 bps
to 2.6%, NII growth at 21% yoy in 1QFY12, (2) average CASA ratio steady at 40% which is
commendable in a rising rate environment, (3) fee income growth was somewhat weaker at 12%,
(4) loan growth was at 20%, 2% qoq growth and (5) asset quality improved further with net NPLs
at 1%, provision coverage at 77% with negligible net slippages.
We expect margins to improve during the course of the year, on back of its liability profile, as well
as improving international margins (currently at 90 bps). With better fee income growth and likely
lower provisions, earnings growth is expected to remain strong in FY2012-13E.
While we remain very positive on earnings, a low RoE limits upsides. RoE for FY2011 was at 9.8%,
with consolidated RoE at about 11%. We expect this to increase to 15% in FY2012-13E. We
believe that valuation expansion will largely depend on its ability to expand RoE quickly to over
15% levels. The international subsidiaries are a big drag on profitability as they are generating
RoEs of only 5%. Currently the stock trades at 1.6X FY2013E book.
Loan growth in line with industry average led by non-retail segment
ICICI Bank’s loan growth was in line with industry average at 20% yoy and 2% qoq. The
management expects loan book to grow at 18% in FY2012E mainly in secured retail lending,
infrastructure and corporate working capital. For the quarter, corporate loans grew by 45% yoy,
SME loans by 50% yoy while international loans grew by 17% yoy and retail loans by 13% yoy.
Within retail, housing loans grew by 19% yoy while housing loans grew by 16% yoy.
We expect loan book to grow by 18% CAGR in FY2012-13E driven largely by corporate loans. The
management will increase its thrust on priority sector loans as it would like to reduce the current
shortfall.
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