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ICICI Bank
Reuters: ICBK.BO Bloomberg: ICICIBC IN Exchange: BSE Ticker: ICBK
Stable NIM and low credit costs; maintaining Hold
Stable operations, profitable growth can be challenging
The return of normal balance sheet growth is a big positive for the bank. However,
this also implies that the improvements of the past couple of years in some
parameters – CASA, opex, credit costs – could reverse. NIM on overseas
operations (~25% of loans) is improving; however, domestic NIM will likely
decline in line with the rest of the sector. The stock appears fairly valued at 2.1x
FY12E P/B with FY12E RoE of 11%. We maintain Hold with a TP of INR1,115.
1QFY12 results – stable performance
Net profit at INR13.32bn, +29.8% YoY and -8.3% QoQ, was ~5.5% below DBe
and ~3% below consensus. NII was +21.1% YoY and -3.9% QoQ. NIM at 2.6%,
+10bps YoY and -10bps QoQ, was in line with DBe. While the period-end CASA
ratio declined 320bps QoQ to 41.9%, average CASA was flat QoQ at ~40%. Fee
income growth at 11.7% YoY was lower than loan growth at 19.7%. Asset quality
remained stable, with gross NPL flat QoQ at INR99.8bn and provision coverage
improving to 77%. Of INR4.54bn in provisions during 1QFY12, INR1.45bn was on
account of the change in RBI regulations on provisions.
Maintaining domestic NIM will be challenging, asset quality stable
The bank has lowered its FY12E loan growth estimate from ~20% earlier to ~18%
now, factoring in high interest rates and lower credit demand. While the overseas
NIM could expand from the current levels of ~90bps, we believe that the
domestic NIM will likely remain under pressure and this may make it challenging
for the bank to sustain overall NIM at 2.6% levels. Asset quality continues to be
comfortable for now and the bank expects FY12E credit costs to be ~80bps.
SOTP valuation; faster loan growth, retail competition risks to Hold rating
We value ICICI on a SOTP basis, with the core business valued on P/BV, insurance
on appraisal value and others on P/BV, P/E or % of AUM. The main upside could
be a stronger return of corporate capex, accelerating loan growth, while the key
downside could be a delay in rebuilding the retail asset portfolio due to irrational
competition. This is the only stock in our coverage that we value with a 100%
weight to sustainable RoE of 16.2% and no weight for the near-term, lower RoEs.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ICICI Bank
Reuters: ICBK.BO Bloomberg: ICICIBC IN Exchange: BSE Ticker: ICBK
Stable NIM and low credit costs; maintaining Hold
Stable operations, profitable growth can be challenging
The return of normal balance sheet growth is a big positive for the bank. However,
this also implies that the improvements of the past couple of years in some
parameters – CASA, opex, credit costs – could reverse. NIM on overseas
operations (~25% of loans) is improving; however, domestic NIM will likely
decline in line with the rest of the sector. The stock appears fairly valued at 2.1x
FY12E P/B with FY12E RoE of 11%. We maintain Hold with a TP of INR1,115.
1QFY12 results – stable performance
Net profit at INR13.32bn, +29.8% YoY and -8.3% QoQ, was ~5.5% below DBe
and ~3% below consensus. NII was +21.1% YoY and -3.9% QoQ. NIM at 2.6%,
+10bps YoY and -10bps QoQ, was in line with DBe. While the period-end CASA
ratio declined 320bps QoQ to 41.9%, average CASA was flat QoQ at ~40%. Fee
income growth at 11.7% YoY was lower than loan growth at 19.7%. Asset quality
remained stable, with gross NPL flat QoQ at INR99.8bn and provision coverage
improving to 77%. Of INR4.54bn in provisions during 1QFY12, INR1.45bn was on
account of the change in RBI regulations on provisions.
Maintaining domestic NIM will be challenging, asset quality stable
The bank has lowered its FY12E loan growth estimate from ~20% earlier to ~18%
now, factoring in high interest rates and lower credit demand. While the overseas
NIM could expand from the current levels of ~90bps, we believe that the
domestic NIM will likely remain under pressure and this may make it challenging
for the bank to sustain overall NIM at 2.6% levels. Asset quality continues to be
comfortable for now and the bank expects FY12E credit costs to be ~80bps.
SOTP valuation; faster loan growth, retail competition risks to Hold rating
We value ICICI on a SOTP basis, with the core business valued on P/BV, insurance
on appraisal value and others on P/BV, P/E or % of AUM. The main upside could
be a stronger return of corporate capex, accelerating loan growth, while the key
downside could be a delay in rebuilding the retail asset portfolio due to irrational
competition. This is the only stock in our coverage that we value with a 100%
weight to sustainable RoE of 16.2% and no weight for the near-term, lower RoEs.
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