ICICI Bank - Diwali 2012 Pick - Angel Broking

ICICI Bank's substantial branch expansion (from 955 branches at the end of 3QFY2008 to 2,772 branches by 2QFY2013) and strong capital adequacy at 18.3% (tier-1 at 12.8%) have positioned it to gain CASA and credit market share, respectively. Over FY2010-12, the bank improved its market share of savings deposits by 11bp, capturing a substantial 5.5% incremental market share.

The bank's strategic transformation has expectedly resulted in significantly better balance sheet and earnings quality. The distinguishing feature of the bank's performance in FY2010 was the improvement in CASA ratio to 42.1% (transformative considering that the ratio was as low as 22% at the end of FY2007 and 29% even as recently as FY2009). The CASA ratio as of 2QFY2013 remains healthy at 40.7%.

The bank's asset quality continues to improve, with a declining trend in additions to gross as well as net NPAs. The reduction in risk profile of advances has resulted in a commensurate decline in NPA provisioning costs and is reflected in improved RoA, from 1.0% in FY2010 to 1.3% in FY2012.

The stock is trading at an attractive valuation of 1.7x FY2014E P/ABV. Hence, we maintain our Buy view on the stock with a target price of Rs.1,270, valuing the core bank at 2.2x FY2014E P/ABV and assigning a value of Rs.153 to its subsidiary.

Source : Equity Bulls

Keywords