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ICICI BANK
TARGET PRICE: Rs. 1364
RECOMMENDATION: BUY
INVESTMENT RATIONALE
Bank has been focusing on 5Cs (Credit growth, CASA mobilization, Cost
optimization, Credit quality improvement, and Customer centricity); after
achieving substantial success on these fronts, we believe they would
continue to focus on profitable growth.
Improvement in liability franchise is positive. Share of CASA improved
from 28.7% at the end of FY09 to 45.1% at the end of FY11; although it
declined to 41.9% at the end of Q1FY12, on average basis it remained
stable at ~40% during Q1FY12 (YoY).
Declining slippages in last couple of quarters corroborate our view that
retail NPL cycle has peaked. Net NPA further improved to 0.91% at the
end of Q1FY12 from 1.62%, a year ago.
NIM came at 2.6% during Q1FY12; it declined sequentially from 2.7% in
Q4FY11, in line with the expectations as bank has to build-up low
yielding priority sector book in last quarter to meet the regulatory
requirements.
Based on SOTP methodology, TP: Rs.1364 [standalone business:
Rs.1128 (2.25x FY12E ABV); value of subsidiaries: Rs.236]
RISKS & CONCERNS
With retail book at ~40% of total loans, highly vulnerable to system-wide
deterioration in retail asset quality.
Further monetary tightening by the central bank may impact its margin.
Slowdown in economic activities might affect the asset quality negatively.
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