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While the decline in provisions remains the key driver of ICICIBC's
profitability, there was a modest c6% rise in operating profit. Loan
growth in the Sep11 quarter was sustained at c20% and was driven by
domestic corporate loans. Retail loans and home loans, excluding
builder loans, grew slower, at 5% y‐o‐y. NIM remained stable at 2.6%.
We factor in lower fee income and reduce the net profit forecast for
FY12f‐FY14f by up to 11%. However, we lower our forecast for loanloss
provisions for FY12f. We roll over our target price to Sep12 and
lower it to INR1,186. The target price values the stock at 2.1x one‐year
forward adjusted book value. We maintain Buy. Higher than estimated
NPL provisions and NIM contraction are the key risks.
Corporate segment stays key driver of loan growth; NIM remains stable
Loan growth was sustained at c20% in the Sep11 quarter (up 6.0% q‐o‐q and
20.5% y‐o‐y) and was driven by domestic corporate loans (up 31% y‐o‐y). The
retail book continues to grow much slower, at 5% y‐o‐y. Growth in retail loans
was largely driven by home loans (up 7% y‐o‐y). Vehicle loans grew at much
slower pace of c2%. Management has maintained their guidance of 18% for
loan growth for FY12. NIM for the quarter remained stable at 2.6%, while NII
growth was modest at c14%. While the CASA ratio remained stable at 42%,
savings deposits growth moderated to 11%.
Operating profit rises, while NPL provision continues to decline y‐o‐y
There was a c6% rise in operating profit, driven by NII and other income.
Provisions declined by 50% y‐o‐y to INR3.2bn in the Sep11 quarter. The net NPL
ratio declined by 11‐bp sequentially and 57‐bp y‐o‐y to 0.80%. Restructured
loans increased during the Sep11 quarter to INR25bn (1.1% of net loans) at end
Sep11, largely due to restructuring in the microfinance sector. Addition to gross
NPL increased from INR7.5bn to INR7.9bn. We estimate a 30% y‐o‐y decline in
loan‐loss provisions in FY12f (compared with a 49% decline in FY11) and a 76%
increase in FY13f. We estimate NPL provisions as a percentage of net loans to
decline by 40‐bp in FY12f to 0.59%.
Target price values the stock at 2.1x adjusted book value; maintain Buy
We lower our net profit forecast for FY12f by 2.5% as we factor in lower other
income. However, we reduce our forecast for loan‐loss provision for FY12f by
27% as we lower our assumption for incremental NPL by 30‐bp to 0.60%. We
forecast loan‐loss provisions to rise in the following two years by up to 76% y‐oy,
driven by the rise in incremental NPL. We roll over the TP to Sep12 and lower
it to INR1,186. The fair value of the standalone bank, at INR943/share, is a
weighted average where we assign a weight of 30% to our DCF‐based fair value
and 35% each to our P/E and P/B‐based fair values. We add the fair value of the
subsidiaries (INR243.3/share) to arrive at the TP. The TP values the stock at 2.1x
one‐year forward adjusted book value. We maintain the Buy rating. Higher
than estimated NPL provisions and NIM contraction are the key risks.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
While the decline in provisions remains the key driver of ICICIBC's
profitability, there was a modest c6% rise in operating profit. Loan
growth in the Sep11 quarter was sustained at c20% and was driven by
domestic corporate loans. Retail loans and home loans, excluding
builder loans, grew slower, at 5% y‐o‐y. NIM remained stable at 2.6%.
We factor in lower fee income and reduce the net profit forecast for
FY12f‐FY14f by up to 11%. However, we lower our forecast for loanloss
provisions for FY12f. We roll over our target price to Sep12 and
lower it to INR1,186. The target price values the stock at 2.1x one‐year
forward adjusted book value. We maintain Buy. Higher than estimated
NPL provisions and NIM contraction are the key risks.
Corporate segment stays key driver of loan growth; NIM remains stable
Loan growth was sustained at c20% in the Sep11 quarter (up 6.0% q‐o‐q and
20.5% y‐o‐y) and was driven by domestic corporate loans (up 31% y‐o‐y). The
retail book continues to grow much slower, at 5% y‐o‐y. Growth in retail loans
was largely driven by home loans (up 7% y‐o‐y). Vehicle loans grew at much
slower pace of c2%. Management has maintained their guidance of 18% for
loan growth for FY12. NIM for the quarter remained stable at 2.6%, while NII
growth was modest at c14%. While the CASA ratio remained stable at 42%,
savings deposits growth moderated to 11%.
Operating profit rises, while NPL provision continues to decline y‐o‐y
There was a c6% rise in operating profit, driven by NII and other income.
Provisions declined by 50% y‐o‐y to INR3.2bn in the Sep11 quarter. The net NPL
ratio declined by 11‐bp sequentially and 57‐bp y‐o‐y to 0.80%. Restructured
loans increased during the Sep11 quarter to INR25bn (1.1% of net loans) at end
Sep11, largely due to restructuring in the microfinance sector. Addition to gross
NPL increased from INR7.5bn to INR7.9bn. We estimate a 30% y‐o‐y decline in
loan‐loss provisions in FY12f (compared with a 49% decline in FY11) and a 76%
increase in FY13f. We estimate NPL provisions as a percentage of net loans to
decline by 40‐bp in FY12f to 0.59%.
Target price values the stock at 2.1x adjusted book value; maintain Buy
We lower our net profit forecast for FY12f by 2.5% as we factor in lower other
income. However, we reduce our forecast for loan‐loss provision for FY12f by
27% as we lower our assumption for incremental NPL by 30‐bp to 0.60%. We
forecast loan‐loss provisions to rise in the following two years by up to 76% y‐oy,
driven by the rise in incremental NPL. We roll over the TP to Sep12 and lower
it to INR1,186. The fair value of the standalone bank, at INR943/share, is a
weighted average where we assign a weight of 30% to our DCF‐based fair value
and 35% each to our P/E and P/B‐based fair values. We add the fair value of the
subsidiaries (INR243.3/share) to arrive at the TP. The TP values the stock at 2.1x
one‐year forward adjusted book value. We maintain the Buy rating. Higher
than estimated NPL provisions and NIM contraction are the key risks.
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