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ICICI Bank
Overweight
ICBK.BO, ICICIBC IN
Robust asset quality, steadily moving forward
ICICI delivered a 6% positive surprise on PAT for 1Q FY12 (Rs13.3B, up
30% y/y), driven by sustained asset quality improvement. 2% y/y PPOP
growth tracked below trend – we expect this to accelerate in subsequent
quarters. We foresee ROAs continuing to trend up, led by asset quality –
ICICI stays our top pick.
Revenue streams improving slowly: The 10% y/y revenue growth was
the fastest since 1Q FY09, though tracking below our FY12 forecast of
18%. The key disappointment was fee growth at 11%, primarily from
pressures on insurance distribution fees – loan growth was in-line and
margins were resilient. We think revenues will accelerate, albeit slowly,
but could disappoint in FY1. FY13 should be robust at ~22%.
Asset quality in a sweet spot: ICICI’s continuous improvement in asset
quality continued, with credit costs at 85bp, of which ~30% was a oneoff from the new RBI guidelines. Adjusting for the one-offs, our 82bp
FY12 forecast looks pessimistic. We believe the key drivers of improved
quality are reduced exposure to unsecured debt, better credit discipline,
and a strong economy.
Improved balance sheet: ICICI’s improved balance sheet quality will
also make it relatively resilient to the slightly weaker macro
environment we anticipate in the coming quarters. The CASA ratio
remains at ~40%, the loan mix remains relatively low-risk (the
expansion in power exposure is the only red flag), and wholesale
deposits are stable at ~35%.
We retain our EPS forecasts of 33% for FY12 and 22% for FY13,
although some line items may change. ICICI’s P/BV is 2.1x for FY12E,
a 20% discount to peer AXSB. We expect it to rerate over the next 1-2
years, driven by ROA improvement (23bp over FY11-14E) on the back
of better NIMs and improved credit costs.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ICICI Bank
Overweight
ICBK.BO, ICICIBC IN
Robust asset quality, steadily moving forward
ICICI delivered a 6% positive surprise on PAT for 1Q FY12 (Rs13.3B, up
30% y/y), driven by sustained asset quality improvement. 2% y/y PPOP
growth tracked below trend – we expect this to accelerate in subsequent
quarters. We foresee ROAs continuing to trend up, led by asset quality –
ICICI stays our top pick.
Revenue streams improving slowly: The 10% y/y revenue growth was
the fastest since 1Q FY09, though tracking below our FY12 forecast of
18%. The key disappointment was fee growth at 11%, primarily from
pressures on insurance distribution fees – loan growth was in-line and
margins were resilient. We think revenues will accelerate, albeit slowly,
but could disappoint in FY1. FY13 should be robust at ~22%.
Asset quality in a sweet spot: ICICI’s continuous improvement in asset
quality continued, with credit costs at 85bp, of which ~30% was a oneoff from the new RBI guidelines. Adjusting for the one-offs, our 82bp
FY12 forecast looks pessimistic. We believe the key drivers of improved
quality are reduced exposure to unsecured debt, better credit discipline,
and a strong economy.
Improved balance sheet: ICICI’s improved balance sheet quality will
also make it relatively resilient to the slightly weaker macro
environment we anticipate in the coming quarters. The CASA ratio
remains at ~40%, the loan mix remains relatively low-risk (the
expansion in power exposure is the only red flag), and wholesale
deposits are stable at ~35%.
We retain our EPS forecasts of 33% for FY12 and 22% for FY13,
although some line items may change. ICICI’s P/BV is 2.1x for FY12E,
a 20% discount to peer AXSB. We expect it to rerate over the next 1-2
years, driven by ROA improvement (23bp over FY11-14E) on the back
of better NIMs and improved credit costs.
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