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ICICI Bank (ICICIBC)
Banks/Financial Institutions
Stable quarter. ICICI Bank reported earnings growth of 22% yoy largely driven by
lower provisions on the back of healthy asset quality. Strong liability franchise has
enabled the bank to deliver steady margins while loan growth was broadly in line with
the industry. Lower fee income growth and lack of growth in retail loans were the
primary weaknesses. We have marginally revised earnings downwards to factor weak
corporate fees. International subsidiaries continue to remain a drag on profitability.
Stock trades at 1.6X FY2013E book and 16X EPS for the parent banking business.
On course towards consistent performance
ICICI Bank reported another steady quarter: (1) Margins were flat at 2.6%, NII growth at 14% yoy
in 2QFY12, (2) CASA ratio steady at 42% (flat qoq), (3) loan growth was strong at 20% yoy, 6%
qoq growth (primarily driven by corporate and international), (4) asset quality improved further
with net NPLs at 0.9% (1% in June 2011), provision coverage was 78% with negligible net
slippages, and (5) international business continued to increase balance sheet liquidity. We expect
NIMs to improve during the course of the year on the back of its liability profile as well as
improving international margins (currently at 90 bps). Weak loan growth in retail segment and
slow fee income growth are the main concern areas.
We maintain our BUY rating on the stock but low RoEs will limit upsides. We expect RoEs to
improve to about 15% by FY2013E. The international subsidiaries are a big drag on profitability as
they are generating RoEs of only 5%. We are valuing the bank at `1,100—standalone bank at
1.9X FY2013E book (adjusted) and the subsidiaries at `235 (UK and Canada continue to be valued
below book—0.6X).
Retail loan growth weak though overall loan growth in line with industry
ICICI Bank’s loans grew in line with industry average at 20% yoy and 6% qoq primarily driven by
corporate and international loans. The management expects loan book to grow at 18% in
FY2012E mainly in secured retail lending, infrastructure (from projects under execution) and
corporate working capital. Retail loan growth continues to remain well below industry average
(1% qoq decline, 5% yoy growth) despite serious attempts from the management to boost
disbursements. During 2QFY12, corporate loans grew by 40% yoy, SME loans by 42% yoy while
international loans grew by 22% yoy and retail loans by 13% yoy. Within retail, housing loans
grew by 9% yoy, commercial vehicles by 15% yoy and auto loans by 10% yoy.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
ICICI Bank (ICICIBC)
Banks/Financial Institutions
Stable quarter. ICICI Bank reported earnings growth of 22% yoy largely driven by
lower provisions on the back of healthy asset quality. Strong liability franchise has
enabled the bank to deliver steady margins while loan growth was broadly in line with
the industry. Lower fee income growth and lack of growth in retail loans were the
primary weaknesses. We have marginally revised earnings downwards to factor weak
corporate fees. International subsidiaries continue to remain a drag on profitability.
Stock trades at 1.6X FY2013E book and 16X EPS for the parent banking business.
On course towards consistent performance
ICICI Bank reported another steady quarter: (1) Margins were flat at 2.6%, NII growth at 14% yoy
in 2QFY12, (2) CASA ratio steady at 42% (flat qoq), (3) loan growth was strong at 20% yoy, 6%
qoq growth (primarily driven by corporate and international), (4) asset quality improved further
with net NPLs at 0.9% (1% in June 2011), provision coverage was 78% with negligible net
slippages, and (5) international business continued to increase balance sheet liquidity. We expect
NIMs to improve during the course of the year on the back of its liability profile as well as
improving international margins (currently at 90 bps). Weak loan growth in retail segment and
slow fee income growth are the main concern areas.
We maintain our BUY rating on the stock but low RoEs will limit upsides. We expect RoEs to
improve to about 15% by FY2013E. The international subsidiaries are a big drag on profitability as
they are generating RoEs of only 5%. We are valuing the bank at `1,100—standalone bank at
1.9X FY2013E book (adjusted) and the subsidiaries at `235 (UK and Canada continue to be valued
below book—0.6X).
Retail loan growth weak though overall loan growth in line with industry
ICICI Bank’s loans grew in line with industry average at 20% yoy and 6% qoq primarily driven by
corporate and international loans. The management expects loan book to grow at 18% in
FY2012E mainly in secured retail lending, infrastructure (from projects under execution) and
corporate working capital. Retail loan growth continues to remain well below industry average
(1% qoq decline, 5% yoy growth) despite serious attempts from the management to boost
disbursements. During 2QFY12, corporate loans grew by 40% yoy, SME loans by 42% yoy while
international loans grew by 22% yoy and retail loans by 13% yoy. Within retail, housing loans
grew by 9% yoy, commercial vehicles by 15% yoy and auto loans by 10% yoy.
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