Reiterate 'BUY' on ICICI Bank – TP increased to Rs.1216 - Geojit BNP Paribas

- Q2FY13 PAT came in above estimates at Rs.1960 crores (up 30.1%, YoY), while NII was Rs.3370 crores (up 34.5% YoY), driven by stable NIM (3%, QoQ), which was a marginal positive surprise.

- Total loans grew 17.6%, YoY, and 2.5%, QoQ; but the domestic loan growth was the key factor, up 22.2%, YoY, and 5.6%, QoQ, as international loans declined 5.6%, QoQ.

- Asset quality and credit costs remained stable despite ICICI recognizing its Deccan Chronicle exposure of Rs.500 crores and providing 85% upfront through P&L.

- Sustaining loan growth remains a key stock catalyst (guidance of 20% for domestic loans and flat to marginal decline for the international book), in spite of the persisting restructuring risks.

- The stock provides decent upside potential with expected improvements in NIM (up 12 – 20bps p.a.), over FY13-FY15e, and improvements in core RoEs (200 – 250 bps).

- ICICI Bank remains one of our top picks in our private banking universe due to its improving return ratios, high Tier I Capital Adequacy Ratio (12.8%), lower restructured pipeline with controlled credit growth and credit costs. We reiterate a Buy on ICICI Bank with an increased Target Price of Rs.1216 (from Rs.1036 earlier).

- Downside risks to Target Price: Higher-than expected restructuring/slippages and lower-than-assumed loan growth.

Source : Equity Bulls

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