ICICI Bank - Diwali Picks 2012 - Microsec

We recommend "ICICI Bank" a BUY. ICICI bank is India's largest Private Sector Bank with a balance sheet size of over INR6 trillion and a strong distribution network of 2755 branches and 9366 ATMs and also has a strong presence in 19 countries. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialised subsidiaries in the areas of investment banking, life and non-life insurance, venture capital and asset management.

Growth in advances to continue, may surpass industry growth: The bank has improved its asset quality and also pushed up its margin to healthy level. The banks consolidated advance has grown at a CAGR of ~14%, while standalone advance ~18% over FY12. We believe that growth in retail portfolio coupled with offtake of past project sanctions and working capital demand by the corporate may help the bank to deliver their credit growth a CAGR of ~19% over FY14e to reach ~INR413650 crore despite challenging environment.

Improving Deposit Growth: After cautiously de growth of balance sheet over FY10, ICICI Bank has improved its liabilities franchise. Contribution of CASA deposits in total deposits in FY12 was ~42%. We believe that bank's deposits growth may beat the industry's deposit s growth in the coming years, driven by bank's thoughtful business strategy along with the new initiative taken by the bank.
Maintaining improving in CASA Funding: Bank's key priority towards healthy growth in current & savings accounts deposits has helped it to crossed CASA deposits over INR1.18trillion as on FY12. We expect that bank will maintain its CASA growth in the coming years at a CAGR of 17.72% over the period of FY12-14E, driven by the bank's continue focus towards CASA deposits coupled with Customer convenience and high quality services backed by strong distribution and innovative use of technology.

Improving Net Interest Margin: The bank's loan book mix has changed favorably with retail and domestic corporate loans. Further, the CASA has improved significantly from ~29% in 2008 to ~42% in 2012. Both the positive factor has helped the bank to improve its Margin income. NIM of the Bank over the past 5 years has improved substantially to 2.73% and also surpassed the industry's margin in FY12, from the erstwhile 2.22% in FY08. Led by the above mentioned factors, we expect that bank's Net Interest Margin may touch to 310bps or 3.10%, which will be ~30bps above than industry over the next couple of year.

Source : Equity Bulls

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