ICICI Bank - 4QFY2012 Result Update - Reliance Securities

4Q results surpass estimates

Key highlights of the result

- Net Profit growth supported by higher core income: ICICI Bank's consolidated Net Profit for 4QFY2012 increased 15.5% yoy but declined 16.7% qoq to Rs1,810cr. The standalone Net Profit of the bank reported a growth of 31% yoy and 10% qoq to Rs1,902cr. This was due to higher Net Interest Income (NII) of 23.7% yoy and 14.5% qoq to Rs3,105cr. The life insurance business witnessed a slowdown owing to the annualized premium equivalent (APE) declining ~22% yoy to Rs3,118cr in FY2012. However, barring ICICI Bank & the international bank subsidiaries, which supported the overall consolidated Net Profit, other subsidiaries reported muted profit numbers in 4QFY2012. ICICI General contributed Rs685cr during 4QFY2012 towards additional motor pool losses pursuant to the IRDA order. After taking the same into account, ICICI General reported a loss of Rs416cr for FY2012.

- Loan growth steady with moderate deposit growth: Total loan book grew 17.3% yoy and 3.1% qoq to Rs2.5 lakh crore on the back of increased demand from Overseas, Domestic Corporate & SME book. Total deposits of the bank grew 13.3% yoy, whereas, it declined 2% qoq to Rs2.6 lakh crore. In 4QFY2012, CASA ratio stood at 43.5% as compared to 45.1% as on 4QFY2011 (average CASA was maintained at 39% qoq). Domestic NIMs surprisingly expanded 33bp qoq to 3.3% and international NIMs increased 10bp to 1.5% in 4QFY2012.

- Asset quality in check: Gross non-performing assets (GNPA) stood at 3.6% in 4QFY2012 v/s 4.5% in 4QFY2011 and 3.8% in 3QFY2012. GNPA in absolute terms declined 5.4% qoq to Rs9,563cr. We have factored 3.7% GNPA for FY2013E & FY2014E respectively.

Outlook and Valuation

ICICI Bank's 4QFY2012 results beat our expectations with better than expected core income and improving asset quality. Mobilisation of CASA deposits had been challenging given the volatility in demand deposits in the overall banking system. Despite this, the Bank maintained its average CASA ratio of 39%. We like the bank due to its strong distribution network, high CASA deposits & improving asset quality (negligible restructured pipe-line).

At CMP of Rs869, the bank is trading at 1.4x FY2014E ABV (after adjusting for subsidiaries). The bank's share price had appreciated more than 12% (since our last report dated November 2, 2011) to surpass our previous target price of Rs990. We rollover our target price to FY2014 estimates and recommend a Buy on ICICI Bank. Based on SOTP valuation methodology (exhibit 6), we arrive at a target price of Rs1,047, indicating an upside of ~20% from the current levels.

Risks to the view

- Any unprecedented domestic deteriorating environment in terms of policy reform deadlock would affect our loan and business growth estimates for the bank

- Lower than expected profits from the bank's life insurance business & international subsidiaries hold downward investment risk for the bank.

Source : Equity Bulls

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