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ICICI Bank (ICICIBC IN – Rs845 – BUY)
Targeting 18% loan growth with stable CASA ratio
1. During FY12, management expects to achieve ~18% growth in loans
driven by growth in corporate loans, both domestic and overseas.
Growth in loans driven by
growth in corporate loans
2. Growth in retail segment will be led 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 liability structure and profitability.
3. Bank plans to maintain CASA ratio ~40% and targets to keep credit costs
low (targeting 80bps). Healthy ROA and rise in leverage will drive
expansion in ROE over next 2-3 years.
Margins to be stable in FY12 and may expand in FY13
4. Management believes that during FY12 margins are likely to be stable YoY
at 2.6% (~3% domestic and ~85bps overseas).
During FY12 margins are
likely to be near 2.6%
5. Margins may expand in FY13 led by rise in average CASA ratio and
repricing of forex assets.
6. Improvement in competitive/ pricing environment in domestic market is a
positive.
Limited risk in power and real estate exposures; SME share is low
7. Power sector loans form 4.5% of ICICI’s total loans and less than 7% of
total exposures.
8. The management highlighted that loans were granted after careful
evaluation of sponsor’s track-record, fuel availability, offtake agreement
and tariffs.
9. Moreover, their sensitivity analysis indicates adequate debt-service
coverage ratio (DSCR) under cases of substantially lower PLF and higher
imported coal than originally assumed.
Sensitivity analysis
indicates adequate DSCR
under stress tests
10. Commercial real estate exposures form 4% of total and comprise of
developer financing, loans against property and balance sheet financing
where part security/ takeout is from CRE.
11. Loans are backed by cash flows from projects as well as adequate security
cover.
12. Share of SME is just 5% of loans, two-thirds of retail loans are mortgages
and MFI exposure is down to Rs10bn of which 75% may be restructured.
Lower and de-risked international portfolio
13. The total assets of UK and Canadian Banking subsidiaries have declined
by 20-30% since Jun-09.
Assets in Canada and UK
subsidiaries are down 20-
30% since Jun-09
14. The investment in bonds/ notes of FIs in ICICI UK has declined from
US$2.1bn in Jun-09 to US$640m and there is no exposure to peripheral
Europe.
15. Bank plans to get the capital back from some overseas subsidiaries and
has started conversation with regulators. CDS exposures have more than
halved to Rs21bn and are mostly to Indian corporate.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ICICI Bank (ICICIBC IN – Rs845 – BUY)
Targeting 18% loan growth with stable CASA ratio
1. During FY12, management expects to achieve ~18% growth in loans
driven by growth in corporate loans, both domestic and overseas.
Growth in loans driven by
growth in corporate loans
2. Growth in retail segment will be led 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 liability structure and profitability.
3. Bank plans to maintain CASA ratio ~40% and targets to keep credit costs
low (targeting 80bps). Healthy ROA and rise in leverage will drive
expansion in ROE over next 2-3 years.
Margins to be stable in FY12 and may expand in FY13
4. Management believes that during FY12 margins are likely to be stable YoY
at 2.6% (~3% domestic and ~85bps overseas).
During FY12 margins are
likely to be near 2.6%
5. Margins may expand in FY13 led by rise in average CASA ratio and
repricing of forex assets.
6. Improvement in competitive/ pricing environment in domestic market is a
positive.
Limited risk in power and real estate exposures; SME share is low
7. Power sector loans form 4.5% of ICICI’s total loans and less than 7% of
total exposures.
8. The management highlighted that loans were granted after careful
evaluation of sponsor’s track-record, fuel availability, offtake agreement
and tariffs.
9. Moreover, their sensitivity analysis indicates adequate debt-service
coverage ratio (DSCR) under cases of substantially lower PLF and higher
imported coal than originally assumed.
Sensitivity analysis
indicates adequate DSCR
under stress tests
10. Commercial real estate exposures form 4% of total and comprise of
developer financing, loans against property and balance sheet financing
where part security/ takeout is from CRE.
11. Loans are backed by cash flows from projects as well as adequate security
cover.
12. Share of SME is just 5% of loans, two-thirds of retail loans are mortgages
and MFI exposure is down to Rs10bn of which 75% may be restructured.
Lower and de-risked international portfolio
13. The total assets of UK and Canadian Banking subsidiaries have declined
by 20-30% since Jun-09.
Assets in Canada and UK
subsidiaries are down 20-
30% since Jun-09
14. The investment in bonds/ notes of FIs in ICICI UK has declined from
US$2.1bn in Jun-09 to US$640m and there is no exposure to peripheral
Europe.
15. Bank plans to get the capital back from some overseas subsidiaries and
has started conversation with regulators. CDS exposures have more than
halved to Rs21bn and are mostly to Indian corporate.
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