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3QFY2011 Result Review
ICICI Bank
For 3QFY2011, ICICI Bank reported healthy net profit growth of 16.2% qoq and 30.5% yoy
to `1,437cr, above our estimates of `1,353cr, mainly on account lower provisioning
expenses. Provisioning expenses for 3QFY2011 declined materially to just 0.5% of average
assets (1.2% in FY2010), reflecting the strong qualitative improvement in the bank’s balance
sheet and earnings quality that we have been building into our estimates for the bank.
Operating expenses grew by 9.4% qoq on the back of a sharp rise of 21.8% qoq in staff
expenses. On account of higher staff expenses, the cost-to-income ratio increased to 42.3%
from 41.5% in 2QFY2011.
Advances showed strong traction, growing by 6.4% qoq (the highest in the last 14 quarters)
and 15.3% yoy. Deposits growth was a bit muted with a sequential decline of 2.4% and yoy
growth of 10.2%. The CASA ratio improved further to 44.2% from 44.0% in 2QFY2011 and
39.6% in 3QFY2010. On a sequential basis, calculated NIMs improved marginally by 2bp to
2.51%. This resulted into NII growth of 4.9% qoq and 12.3% yoy to `2,312cr. Gross NPAs
increased marginally by 0.4% qoq, while net NPAs declined by 8.7% sequentially. The bank’s
provision coverage ratio including write-offs improved to 71.8% from 69.0% as of
2QFY2011 and from 51.2% as of 3QFY2010. The capital adequacy ratio continues to be
strong at 20.0%, with tier-I capital of 13.7% (constituting 68.7% of the total CAR).
In our view, the bank’s substantial branch expansion (1,508 branches added from
3QFY2008 to 2QFY2011, including entire branch network of BoR) as well as strong capital
adequacy at 20.0% (tier-I at 13.7%) have positioned it to gain market share that will
contribute to substantial core business growth. We expect the bank to deliver strong earnings
CAGR of 29.8% over FY2010–12E and RoE of 15.8% by FY2012E. At the CMP, the stock is
trading at 2.1x FY2012E ABV, without adjusting the SOTP value of subsidiaries. We maintain
our Buy recommendation on the stock with a Target Price of `1,332.
India Equity Research Reports, IPO and Stock News Visit http://indiaer.blogspot.com/ for complete details �� ��
3QFY2011 Result Review
ICICI Bank
For 3QFY2011, ICICI Bank reported healthy net profit growth of 16.2% qoq and 30.5% yoy
to `1,437cr, above our estimates of `1,353cr, mainly on account lower provisioning
expenses. Provisioning expenses for 3QFY2011 declined materially to just 0.5% of average
assets (1.2% in FY2010), reflecting the strong qualitative improvement in the bank’s balance
sheet and earnings quality that we have been building into our estimates for the bank.
Operating expenses grew by 9.4% qoq on the back of a sharp rise of 21.8% qoq in staff
expenses. On account of higher staff expenses, the cost-to-income ratio increased to 42.3%
from 41.5% in 2QFY2011.
Advances showed strong traction, growing by 6.4% qoq (the highest in the last 14 quarters)
and 15.3% yoy. Deposits growth was a bit muted with a sequential decline of 2.4% and yoy
growth of 10.2%. The CASA ratio improved further to 44.2% from 44.0% in 2QFY2011 and
39.6% in 3QFY2010. On a sequential basis, calculated NIMs improved marginally by 2bp to
2.51%. This resulted into NII growth of 4.9% qoq and 12.3% yoy to `2,312cr. Gross NPAs
increased marginally by 0.4% qoq, while net NPAs declined by 8.7% sequentially. The bank’s
provision coverage ratio including write-offs improved to 71.8% from 69.0% as of
2QFY2011 and from 51.2% as of 3QFY2010. The capital adequacy ratio continues to be
strong at 20.0%, with tier-I capital of 13.7% (constituting 68.7% of the total CAR).
In our view, the bank’s substantial branch expansion (1,508 branches added from
3QFY2008 to 2QFY2011, including entire branch network of BoR) as well as strong capital
adequacy at 20.0% (tier-I at 13.7%) have positioned it to gain market share that will
contribute to substantial core business growth. We expect the bank to deliver strong earnings
CAGR of 29.8% over FY2010–12E and RoE of 15.8% by FY2012E. At the CMP, the stock is
trading at 2.1x FY2012E ABV, without adjusting the SOTP value of subsidiaries. We maintain
our Buy recommendation on the stock with a Target Price of `1,332.
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