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Analyst Research Report Snapshot


ICICI Bank (ICICIBC) - Qtr. Update - Dated - April 26, 2013




Axis Capital Limited


27 Apr 2013





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ICICI strengthened its retail franchise in Q4, in line with the recent trend of retail-driven growth for most private banks. Retail loans grew 7% QoQ and savings balances grew 5% QoQ. Management indicated bank targets 25% retail loan growth in FY14 while maintaining the average CASA ratio. The bank will continue to focus on domestic business (likely to grow above industry average at ~20%), which will aid 10 bps expansion in overall margin. Despite targeted addition of ~350 branches in FY14, cost to income ratio is likely to remain within 40% levels. Asset quality too is likely to improve further with controlled credit costs (~75 bps for FY14). We expect RoA to expand by 15 bps over next two years to 1.8% and RoE by 2% to 15% (core RoE at ~17% by FY15). Valuation We maintain our BUY rating on the stock with TP of Rs 1,423 [1.9x FY15E ABV (adj. for invest.) + Rs 348 value of invest.]; upside of 24% from CMP of Rs 1,144. The stock trades at 1.6x FY14E and 1.4x FY15E adj. ABV of Rs 501 and Rs 566 respectively. Business highlights  Reported PAT at Rs 23 bn (up 21% YoY) was in line with our estimate led by NII increase of 22% YoY. Domestic loan growth at 18% was above industry growth rate. While overall loan growth moderated to 14% YoY due to slowdown in overseas book (in line with management guidance), margin improvement supported core interest income growth  Fee income remained muted (up 3% YoY) due to lower corporate activity. For FY14, management guided for double-digit growth rate in fee income, which is comforting  Stable asset quality: Lower slippage ratio at 1.2% (1.7% in 9MFY13) led to marginal improvement in absolute NPAs. Fresh restructuring of ~Rs 8 bn was below management guidance of Rs 10 bn. Recent RBI norms require loans to be restructured on ‘borrower wise’ basis (vs. ‘facility wise’ basis). To comply with these norms, restructured book rose by Rs 3.9 bn. Bank currently has a restructuring pipeline of Rs 6-7 bn (ie. ~0.2% of total loans) Regards, Praveen Agarwal (Executive Director – BFSI) Institutional Equity Research Axis Capital Ltd. Tel.: + 91 22 4325 1102 Siddharth Goel (AVP – BFSI) Institutional Equity Research Axis Capital Ltd. Tel.: +91 22 4325 1126 Namesh Chhangani (AVP – BFSI) Institutional Equity Research Axis Capital Ltd. Tel.: +91 22 4325 1127

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