ICICI Bank - Set for the next leap - Motilal Oswal

Expect earnings CAGR of 23%+; Rising RoEs to drive more re-rating

- ICICI Bank (ICICIBC) is expected to deliver EPS CAGR of 23%+ over FY12-15E, on a higher base of 25%+ over FY10-12, driving up the core RoE from ~10% in FY10 to 17%+ in FY15E. Importantly, the Tier 1 would remain strong at 10%+ at end-FY15.

- With a market share of 4.2% in the domestic loans and largest branch network in the private financials, above industry growth and favorable margins will drive earnings.

- ICICIBC has managed the asset quality well during the last 18 months of pain in the Indian economy. While FY14 will be critical to see the fate of few large exposures, the bank is confident of tiding over this without any dent on its profitability. Recovery in Indian economy / corporate capex will be viewed positive for ICICIBC.

- Valuations for ICICIBC will evolve as it delivers RoE improvement over the next 2 years (to come at the near sector averages). Importantly, it will have scope to further boost its leverage as capital may get boost from return of capital by key subsidiaries.

Source : Equity Bulls

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