17 August 2011

ICICI Bank ( TP: `1,281/ Upside: 35%): Angel Broking, TOP PICKS

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ICICI Bank (CMP: `952/ TP: `1,281/ Upside: 35%)


􀂄 ICICI Bank's substantial branch expansion from 955 branches at the end of
3QFY2008 to 2,533 branches as of 1QFY2012 and strong capital adequacy at
19.6% (Tier-I at 13.4%) have positioned it to gain CASA and credit market share,
respectively. During FY2011, the bank improved its market share of savings deposits
by 10bp over FY2010, capturing a substantial 5.8% incremental market share.
􀂄 The bank has been able to increase its CASA ratio to 45% as of FY2011 and,
contrary to the overall trend in the sector, we expect this favourable change in the
bank's liability mix to improve its NIM to ~2.7% by FY2013.
􀂄 The bank's asset quality continues to show further improvement, with a declining
trend in additions to gross as well as net NPAs. We expect the reduction in risk
profile of advances (and the consequent lower yield on advances) to result in a
~90bp decline in NPA provisioning costs by 2013E over FY2011.
􀂄 The stock is trading at attractive valuations of 1.7x FY2013E P/ABV. Hence,
we maintain our Buy view on the stock with a target price of `1,281, valuing the
core bank at 2.5x FY2013E P/ABV and assigning a value of `191 to its subsidiaries.

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