ICICI Bank - Q4FY13 Result Review - Angel Broking

ICICI bank delivered a healthy performance for 4QFY2013, with net profit growth of 21.2% yoy. On the operating front, the bank witnessed a healthy 22.5% yoy growth in its Net interest income, however disappointment on the non-interest income front with a flat yoy performance, limited the operating profit growth to 15.8% yoy. On the asset quality front, while the bank reported sequentially stable NPA ratios, however, incremental restructuring at around Rs. 1,200cr, came in on expected lines.

Business growth moderate; NIMs improve sequentially by 26bp: During 4QFY2013, the bank's advances grew by 14.4% yoy, aided by a strong 29.9% yoy growth in the domestic corporate book. The growth in the retail portfolio was moderate at 11.4% yoy. On the deposits front, the bank witnessed moderate growth of 14.3% yoy. CASA accretion remained moderate at 10.4% yoy, primarily aided by savings deposits, which increased by 12.6% yoy, even as current deposits declined by 10.4% yoy. CASA ratio was higher by 100bp qoq to 41.9%. The reported overall NIM improved by 26bp qoq to 3.33%, mainly on account of 23bp sequential improvement in the domestic NIM to 3.7%, while international NIM's remained stable sequentially. The non-interest income (excluding treasury) de-grew by 9.9% yoy basis to Rs. 1,866cr, however the bank registered higher treasury gains of Rs. 342cr during the quarter (primarily bond gains) as against Rs. 158cr in 4QFY2012, which aided it to report flat performance on the overall non-interest income front. On the asset quality front, the bank reported stability, as Gross and Net NPA levels remained flat sequentially, on an absolute basis. Gross NPA ratio declined sequentially by 9bp to 3.2%, while net NPA ratio came in flat at 0.8%. During the quarter, the bank restructured loans worth Rs. 1,146cr (though higher, but was on expected lines), thereby taking its restructured book to Rs. 5,315cr.

Outlook and valuation: The bank's substantial branch expansion in the past three to four years is expected to sustain a far more favorable deposit mix going forward. Moreover, a lower risk balance sheet has driven down NPA provisioning costs, which we believe will drive a 15.7% CAGR in net profit over FY2013-15E and enable a RoE of 16.5% by FY2015E (with further upside from financial leverage). At the current market price, the bank's core banking business (after adjusting Rs. 158/share towards value of the subsidiaries) is trading at 1.72x FY2015E ABV (including subsidiaries, the stock is trading at 1.66x FY2015E ABV). We value the bank's subsidiaries at Rs. 158/share and the core bank at Rs. 1,149/share (2.0x FY2015E ABV). We maintain our Accumulate rating on the stock with a target price of Rs. 1,306.

Source : Equity Bulls

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