Still targeting 20% growth in domestic loan book: ICICI maintained its growth
target of 20% in the domestic business largely driven by project disbursals and
pick up in retail credit and such an outcome will be positive in our view as most
banks did indicate that system growth could be ~15%. The target areas in retail
are housing, Auto, and CVs, even though price competition has intensified.
Fee income could miss guidance: Growth in fees income looks challenging given
the weak environment especially large corporate related fund and non fund
based fees and hence core fee could be lower than double digit growth
guidance. But with a low base of project finance, 3rd party and corporate fees,
ICICI expects pick up in fee growth from FY14.
Structural improvement in margins: Mgt maintained their overall FY13 NIM
guidance of +3.0% and expects margins to inch further to 3.2% over the next 2-
3yrs due to (1) Lower share of overseas book (2) Higher share of non-mortgage
secured credit and (3) easing rates. Wholesale TD rates are coming off
marginally but the cost of retail deposits remains sticky (before SBI cut TD rates).
ICICI is awaiting impact of SBI’s lower mortgage rates on their volumes before
moving on mortgage rates.
RIDF investments: There could be a rise in RIDF requirements, but ultimate
allocation to ICICI could be less as the total PSL shortfall in the system could rise
due to increased requirements from foreign banks. Within PSL, ICICI is looking at
gold loans and tractor loans but does not want to do direct Agri lending.
Asset Quality: ICICI maintained its credit cost guidance of 75bps and noted that
the guidance has buffer for slippages like Deccan (Rs5bn exposure). Retail
quality continues to remain robust and but ICICI is seeing some inch-up in
slippages in their SME book but stress seems manageable. Restructuring
pipeline continues to remain thin. ICICI does have some non fund based
exposure to Essar (NavBharat acquisition) which is facing CBI scrutiny currently.
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