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ICICI Bank (ICICIBC) - Annual Report Analysis - Dated - June 10, 2013




Axis Capital Limited


10 Jun 2013





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Retail loans contributed 47% to incremental loans in FY13. Credit cards declined 21% and account for 3% of retail loans. Retail NPAs declined 24% to Rs 58 bn (60% of total NPA), which we believe is due to write-offs in this segment. The bank’s focus on secured retail assets will help in NIM expansion and reduce asset quality risk. ALM analysis reveals deposit maturity profile has seen a continued shift towards higher maturities from 1-3 year basket, reflecting increasing share of retail term deposits. We maintain our BUY rating on the stock with TP of Rs 1,423 [1.9x FY15E ABV (adj. for investments) + Rs 349 value of invest.]; upside of 25% from CMP of Rs 1,141. We expect RoA to expand by 15 bps to 1.8% and RoE by 2% to 15% (core RoE at ~17% by FY15) over next two years. The stock trades at 1.6x FY14E and 1.4x FY15E adj. ABV of Rs 505 and Rs 569 respectively. Other Annual Report highlights:  Priority sector loans grew ~10%: ICICI’s PSL constituted ~88% of the stipulated requirement. RIDF investments rose ~12% to Rs 202 bn (~4% of interest earning assets) to meet the PSL shortfall. ICICI will have to continue investing in low yielding RIDF to make up for PSL shortfall  Controlled slippages, higher write offs led to stable asset quality: Slippage ratio was low and stable at ~1.4%. Write offs of ~Rs 16 bn controlled the rise in absolute NPAs (up 1.4%). We expect the GNPA ratio to come down to 2.7% by FY15 (from current 3.2%) led by controlled slippages and higher recoveries/upgradations  Lower forward contracts impacted forex-related fee: Outstanding forward exchange contracts contracted by 20% leading to lower growth in forex fee (growth at 6% vs. 37% growth in FY12)  Continued decline in securitized pool: Securitization exposure reduced by 29% along with lower credit losses at Rs 0.28 bn. With decreasing reliance on incremental securitization, capital base is likely to be protected going forward Regards, Praveen Agarwal (Executive Director – BFSI) Institutional Equity Research Axis Capital Ltd Tel.: + 91 22 4325 1102 Deepak Agrawal (VP – BFSI) Institutional Equity Research Axis Capital Ltd Tel.: + 91 22 4325 1133 Namesh Chhangani (AVP – BFSI) Institutional Equity Research Axis Capital Ltd Tel.: + 91 22 4325 1127

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