ICICI Bank - Result betters expectations - ElaraCapital

In Q4FY13 results, ICICI Bank reported NII and bottomline marginally better than our estimates; higher NII was mainly due to change in asset composition in favour of retail assets and improvement in liability franchise on sequential basis. The bank reported NII of INR 38bn (4.4% above our estimates of INR 36.4bn); margin expanded further to 330bps (29bps YoY and 23bps QoQ). Non-interest income was below expectations mainly due to muted growth in core fee income; capital gains were lesser due to limited gains in equity trading books. Operating profit was better than estimates due to higher margin and much lesser employees' expenses. Higher than expected net slippages restricted bottomline expansion; reported net profit at INR 23bn was 2.2% above our estimates.

Qualitatively, expansion in margin on the back of improvement in lowcost deposits base and growth in secured retail book (vehicle & other secured loans) was a positive and the bank's management expects further improvement in FY14. On asset quality front, increase in net slippages to INR 3.35bn from INR 2.8bn in Q3FY13 was a grey area; the bank's management guides higher credit cost in FY14 implying increase in stressed assets addition. Increase in restructured loan book was merely a technical revision from facility-wise recognition to borrower-wise recognition.

We maintain our positive stance on the stock with a BUY rating with a revised target price of INR 1,469. Improvement in return ratio would come from revival in volume expansion (of 20% in FY14 as compared to 14.4% in FY13) with flat risk-adjusted margin. Improvement in fee income, containment in operating expenses and strong performance of bigger subsidiaries would be key return ratios drivers.

Source : Equity Bulls

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