ICICI Bank::Takeaways Motilal Oswal Annual Global Investor Conferences

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Key Takeaways
Focus to continue on 5Cs strategy
 ICBK will continue to focus on growth strategy and at the same time will focus on its
5C's (credit growth, cost efficiency, CASA, credit quality and Customer centricity)
Management mentioned that current level of RoA of 1.4% has some room for
improvement from margins, opex and lower provisions.
 Credit growth: Balance sheet growth is likely to be ~18%; with equal contribution
from domestic and overseas business. Within domestic: corporate and secured
retail loans (Auto and Home loans) remains a key focus area.
 Cost efficiency: Operating expenses are likely to grow 20%, and ICBK expects to
maintain cost to average assets at 1.7% and Cost to Income ratio at 40-42% on
long term basis.
 CASA: Focus remains on retail liability driven growth strategy. Management expects
to maintain CASA at 40% on a long term basis.
 Credit quality: Credit quality is gradually improving with net accretion to NPAs
coming down and management does not expect any issues in the near future.
Continues with guidance of 80bp credit cost in FY12.
Focused on de-risking the portfolio
 ICBK UK has scaled down investments in bonds/notes of financial institution from
USD2.1b as of 1QFY10 to USD640m as of 1QFY12. They do not have any exposure
to peripheral European countries.
 Credit derivative exposure (including off balance sheet) has been scaled down to
INR21.3b from INR54.1b. In case of derivative exposure, underlying comprises of
Indian corporates.
Other highlights
 Overseas margins are expected to improve from 90bp as of 1QFY12 to 125bp by
end of the year led by re-pricing on the liability side. Management expects domestic
margins to remain at current levels however there remains an upward bias in FY13
led by fall in securitization losses. For FY12, it expects NIM of 2.6%.
 Fee income growth is likely to remain in-line with asset growth with the focus on
transaction banking, Forex / derivatives and remittance fees. However, growth in
corporate fees would depend on movement in new project announcements and
financial closures.
Valuation and View
Adjusted for FY13 based subs value at INR236/share (post 20% holding company
discount), stock trades at 1.4x FY13E ABV (adjusted for investment in subs) and 9.3x
FY13 EPS. Buy.