ICICI Bank | Q3FY15 Result Update | We upgraded our rating from HOLD to BUY with the revised PT of Rs 440/- using SOTP valuation ::IndiaNivesh

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The reported numbers were broadly in-line with our expectations. The bank continues to grow its business with strong retail momentum. Margins also improved on an improved funding environment and strong CASA flows. However, increase in gross delinquencies (mainly on some large accounts) was the major concern. ICICI Bank remains well positioned to ride the expected uptick in the economy. However, reforms in insurance & stressed infra sector would be key points to watch out going forward. We upgraded our rating from ‘HOLD’ to ‘BUY’ with the revised price target of Rs 440/- using SOTP valuation. Result Highlights ■ NII grew at 13% y-o-y (+3% q-o-q) to Rs 48 bn aided by steady loan growth of 13% y-o-y (Rs 3,753 bn) and marginal increase of 4 bps q-o-q in NIM (3.5%). ■ Deposits grew at 12% y-o-y (+1% q-o-q) to Rs 3,553 bn mainly led by CASA growth (+14% y-o-y). As a result, CASA deposits of the bank improved 30 bps sequentially and stood at 44.0%. ■ Asset quality remained under pressure as the bank added fresh slippages of Rs 22.8 bn (Rs 16.7 bn in Q2FY15) mainly emanating from restructured loans. As a result, Gross NPA and Net NPA increased by 28 bps and 18 bps q-o-q to 3.4% and 1.3%, respectively. Loan restructuring was at Rs 17.6 bn (Rs 8.3 bn in Q2FY15). ■ Consolidated PAT grew modestly 14% y-o-y (+7% q-o-q) supported by life & general insurance businesses earnings. Result Update Domestic retail loans continue to drive loan growth: ICICI Bank reported 13% y-o-y (+4% q-o-q) growth in its total loan book to Rs 3,753 bn largely driven by growth in domestic retail advances. Overseas advances grew 5% y-o-y (+4% q-o-q) to Rs 965 bn. In US dollar terms, the overseas loan book grew 3.5% on y-o-y basis (+2.0% q-o-q). The lower growth in US dollar terms was mainly due to high base effect of Q3FY14 as there was sharp increase in lending against FCNR (B) deposits in Q3FY14. Total Advances Rs mn % of total Q3FY15 Q2FY15 Q3FY14 % QoQ % YoY Overseas 26 964,637 929,716 914,738 4 5 Domestic 74 2,788,814 2,687,857 2,411,582 4 16 Total 100 3,753,451 3,617,573 3,326,321 4 13 Source: Company, IndiaNivesh Research The domestic loan book grew 16% y-o-y (+4% q-o-q) to Rs 2,789 bn mainly led by strong growth of 26% y-o-y in retail advances to Rs 1,535 bn. The growth in retail portfolio continues to be driven by growth in secured products with the outstanding mortgage and auto loan portfolios growing by 27% y-o-y and 32% y-o-y, respectively. Growth in the business banking and rural lending segments were at 13% y-o-y and 35% y-o-y, respectively. Commercial business loans declined 13% y-o-y, reflecting both a slowdown in this segment as well as run-down of the bought out portfolio in this segment. The personal loan grew at a robust pace of 111% y-o-y to Rs 64 bn mainly due to its low base effect as it constitutes only 2% of total advances. Retail loan book now constitutes 41% of total advances as compared to 37% as of Q3FY14. The Bank continued to adopt a cautious approach to grow the corporate and SME loan books mainly due to uncertain economic environment. As a result, the corporate loan book grew 4% y-o-y to Rs 1,089 bn and SME loan book grew 15%

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