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UBS Investment Research
ICICI Bank
NIM beat but fees muted
„ Event: Q1 results in line with UBS-e
Q1FY12 net profit at Rs13.3 (+30% y/y) came in line while better margins
supported NII growth of 21%y/. Other highlights: 1) loans grew 20%y/y, 2%q/q, 2)
Average CASA improved 1% point q/q to 40%, 3) fee income grew 12% y/y, 4)
asset quality remained stable with net NPA at 94bp and provision coverage
marginally inched up to 77%, 5) MFI slippage of Rs2bn out of total slippage of
Rs7.5bn, 6) it has converted shares pledged as security to acquire 30% stake in a
borrower company called GTL Ltd.
„ Impact: Maintain estimates
We expect growth of 18% CAGR over FY12-13 with 25 bps improvement in
NIMs over next 12 months due to better international margins and reduction in
securitization losses. We bring down Fee growth for FY12/13 to 18% from 20%
earlier. We are building in LLP at 80bps/90bps in FY12/13.
„ Action: Buy Rating, PT 1350
We expect earnings to grow at 21% CAGR and consol earnings at 26% CAGR
over FY12-13. We continue to like ICICI Bank for its improving metrics and
relatively better asset quality among peers. The stock trades at 15x FY12
consolidated earnings and 1.8x book (adj for subs).
„ Valuation: Preferred pick in the sector
We value the company on sum of the parts method. We roll over to mid FY13 and
at our price target of Rs1350, the standalone business trades at 2.3x FY13 book and
16.7x FY13 standalone earnings. We value its subsidiaries at Rs320 per share.
Results in line with our expectation
ICICI reported NII growth of 21% y/y which came in line with our expectation.
Overall NIM slipped 10bp q/q to 2.6% while international NIM remained stable
at 90bp with domestic also slipping 10bp q/q to 3%. Management expect to
international NIM to improve from henceforth to 125bp by year-end and sees
overall NIM stable at 2.6% in FY12. Fee income grew 12% y/y as corporate and
retail segment remained sluggish. However, management expect fee to grow in
line with asset growth in rest of the year.
Management sees cost to income ratio in FY12 at 41%/ cost to asset at 1.7%.
The bank had provided Rs1.45bn one-off provision in regard to revised RBI
guidelines and credit cost for the quarter stood at 84bp (57bp adjusted).
Adjusted for this one-off, management sees absolute credit cost to remain stable
and clock average of 80bp in FY12.
Subsidiaries performance review
Subsidiary performance improved during the quarter as operationally all
subsidiaries excluding ICICI Eurasia reported profit. The consolidated net profit
stood at Rs 16.7bn up 53% y/y, 7%q/q. The life insurance subsidiary had started
booking surplus on the non-participating policyholders’ funds from Q3FY11
and adjusted for it consolidated net profit growth will be 26% y/y.
ICICI Bank UK reported 44% y/y decline in net profit to $5mn in the quarter.
The asset book shrunk 6% q/q during the quarter to $6bn. The asset composition
remained stable sequentially with loan book representing 57% of the total asset
and India Linked Investments at $198mn (-23%q/q). Retail deposit represents
63% of total deposits which stood at $3.8bn. The subsidiaries CAR has
improved to 25.4% from 23.1% in FY11.
ICICI Bank Canada reported 38%y/y increase in net profit to CAD12.3mn in
the quarter. Assets increased 13% q/q to CAD5.1bn as it starting reporting in
IFRS which led to accounting of securitised portfolio as investment. Adjusted
for it, total asset came down by 4% q/q. Deposits stood at CAD3.2bn with
demand deposit representing 14% of the book. The subsidiaries CAR stood at
28.5% from 26.3% in FY11.
ICICI Prulife made net profit of Rs3.4bn +15% q/q as renewal premium
income remained strong. Expense ratio came down to 18.9% vs 21.1% in
Q1FY11. Its APE (as per IRDA nos) declined 62% y/y. NBAP margin fell to
16% in 1QFY12 while it was 17.9% in Q4FY11
Q ICICI Bank
ICICI Bank is the largest private sector bank and the second largest bank in
India. It has an asset base of Rs3.66trn. The bank had a network of 1,520
branches at the end of October 2009.
Q Statement of Risk
We believe a sustained economic slowdown could impact the banking and
finance sector on several fronts: lead to a slowdown in credit, increase NPL risk,
impact fee income, and exert pressure on NIM.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
UBS Investment Research
ICICI Bank
NIM beat but fees muted
„ Event: Q1 results in line with UBS-e
Q1FY12 net profit at Rs13.3 (+30% y/y) came in line while better margins
supported NII growth of 21%y/. Other highlights: 1) loans grew 20%y/y, 2%q/q, 2)
Average CASA improved 1% point q/q to 40%, 3) fee income grew 12% y/y, 4)
asset quality remained stable with net NPA at 94bp and provision coverage
marginally inched up to 77%, 5) MFI slippage of Rs2bn out of total slippage of
Rs7.5bn, 6) it has converted shares pledged as security to acquire 30% stake in a
borrower company called GTL Ltd.
„ Impact: Maintain estimates
We expect growth of 18% CAGR over FY12-13 with 25 bps improvement in
NIMs over next 12 months due to better international margins and reduction in
securitization losses. We bring down Fee growth for FY12/13 to 18% from 20%
earlier. We are building in LLP at 80bps/90bps in FY12/13.
„ Action: Buy Rating, PT 1350
We expect earnings to grow at 21% CAGR and consol earnings at 26% CAGR
over FY12-13. We continue to like ICICI Bank for its improving metrics and
relatively better asset quality among peers. The stock trades at 15x FY12
consolidated earnings and 1.8x book (adj for subs).
„ Valuation: Preferred pick in the sector
We value the company on sum of the parts method. We roll over to mid FY13 and
at our price target of Rs1350, the standalone business trades at 2.3x FY13 book and
16.7x FY13 standalone earnings. We value its subsidiaries at Rs320 per share.
Results in line with our expectation
ICICI reported NII growth of 21% y/y which came in line with our expectation.
Overall NIM slipped 10bp q/q to 2.6% while international NIM remained stable
at 90bp with domestic also slipping 10bp q/q to 3%. Management expect to
international NIM to improve from henceforth to 125bp by year-end and sees
overall NIM stable at 2.6% in FY12. Fee income grew 12% y/y as corporate and
retail segment remained sluggish. However, management expect fee to grow in
line with asset growth in rest of the year.
Management sees cost to income ratio in FY12 at 41%/ cost to asset at 1.7%.
The bank had provided Rs1.45bn one-off provision in regard to revised RBI
guidelines and credit cost for the quarter stood at 84bp (57bp adjusted).
Adjusted for this one-off, management sees absolute credit cost to remain stable
and clock average of 80bp in FY12.
Subsidiaries performance review
Subsidiary performance improved during the quarter as operationally all
subsidiaries excluding ICICI Eurasia reported profit. The consolidated net profit
stood at Rs 16.7bn up 53% y/y, 7%q/q. The life insurance subsidiary had started
booking surplus on the non-participating policyholders’ funds from Q3FY11
and adjusted for it consolidated net profit growth will be 26% y/y.
ICICI Bank UK reported 44% y/y decline in net profit to $5mn in the quarter.
The asset book shrunk 6% q/q during the quarter to $6bn. The asset composition
remained stable sequentially with loan book representing 57% of the total asset
and India Linked Investments at $198mn (-23%q/q). Retail deposit represents
63% of total deposits which stood at $3.8bn. The subsidiaries CAR has
improved to 25.4% from 23.1% in FY11.
ICICI Bank Canada reported 38%y/y increase in net profit to CAD12.3mn in
the quarter. Assets increased 13% q/q to CAD5.1bn as it starting reporting in
IFRS which led to accounting of securitised portfolio as investment. Adjusted
for it, total asset came down by 4% q/q. Deposits stood at CAD3.2bn with
demand deposit representing 14% of the book. The subsidiaries CAR stood at
28.5% from 26.3% in FY11.
ICICI Prulife made net profit of Rs3.4bn +15% q/q as renewal premium
income remained strong. Expense ratio came down to 18.9% vs 21.1% in
Q1FY11. Its APE (as per IRDA nos) declined 62% y/y. NBAP margin fell to
16% in 1QFY12 while it was 17.9% in Q4FY11
Q ICICI Bank
ICICI Bank is the largest private sector bank and the second largest bank in
India. It has an asset base of Rs3.66trn. The bank had a network of 1,520
branches at the end of October 2009.
Q Statement of Risk
We believe a sustained economic slowdown could impact the banking and
finance sector on several fronts: lead to a slowdown in credit, increase NPL risk,
impact fee income, and exert pressure on NIM.
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