ICICI Bank In-line results ::Credit Suisse

● ICICI 1Q14 operating profit was in line; however, reported profit
was 4% ahead on strong treasury gains. NIMs held up well at
3.3%; however, with loan growth slowing to 12% YoY, core cost
income moved up to 44%. Fee income picked-up to 9% YoY.
● Domestic loan growth (1.6% QoQ, 14% YoY) was lower than
expected as retail loan growth (Rs31 bn adj for sell downs) didn’t
pick up. However, management remains confident of achieving
18-20% retail growth for full year. We reduce overall loan growth
estimate to ~15% post RBI measures. We expect domestic NIMs
(3.6%) to moderate from current levels.
● Credit cost moved up (82 bp) as NPL additions were higher (Rs11
bn) vs earlier runrate of Rs7-8 bn. Restr’ing was at Rs8.3 bn with
a further pipeline of Rs10-11 bn. Management has maintained
credit cost guidance at ~75 bp; however, we see upside risk to it.
● Consolidated profit was at 32% YoY on better general insurance
profitability aided by treasury gains. Earnings growth is expected to
settle at 13% CAGR and with core ROE at 15%, at 1.4x core book,
maintain NEUTRAL. Cut estimate by 3-4%, reduce TP to Rs1,075.

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Operating profits in line
Operating profit growth was at 10% YoY, on slower top-line growth and
pick-up in provisions. Loan growth has slowed down to 12% YoY as
corporate loan growth moderated to 21% (30% YoY as of Mar-13), while
retail loan growth is yet to pick up meaningfully (13% YoY). NIMs held
up well (at 3.3%) aided by expansion in international NIMs to 1.6%.
Domestic NIMs are likely to decline from the current 3.6% level post RBI
tightening measures. We reduce our loan growth estimate as well to
15% for FY14E. Fee income growth picked up to 9% YoY on increasing
contribution from the retail segment. Management expects to deliver low
double-digit fee income growth for the full year.
Franchise build-up accelerated as the bank added 250 branches
(~150 small rural branches). CASA growth picked up as well (16%
YoY) with the CASA ratio improving to 43%. The bank is targeting to
add 500 branches during the year. Core cost income moved up to
44% (43% for FY13) on slower loan and top-line growth. Problem
asset addition picked up (0.7% of loans) on slippages from mid-corp
and SME segment. Management targets credit cost of ~75 bp for
FY14E (50 bps for FY13) however we see upside risk to the guidance.

Earnings growth to settle at 13% CAGR, maintain NEUTRAL
General insurance profitability improved aided by treasury gains, while
life insurance earnings trajectory is likely to slow down as APE growth
remains muted (-5% YoY). Bank’s earnings growth is expected to
settle at 13% CAGR and with core ROE at 15%, at 1.4x core book,
maintain NEUTRAL. Cut estimate by 3-4% on lower growth, reduce
TP to 1,075.