ICICI Bank - 4QFY2013 Result Update - 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 (excl. treasury) front, which grew at a muted 2.2% yoy, limited the operating profit growth to 15.8% yoy. On the asset quality front, the bank reported sequentially stable NPA ratios and incremental restructuring at ~Rs. 800cr, which is on guided lines.

Business growth moderates; NIMs improve sequentially by 26bp: During 4QFY2013, the bank's advances grew by 14.4% yoy, aided by a strong 30.0% yoy growth in the domestic corporate book, due to bulky short term lending done earlier during the year. Growth in the retail portfolio was moderate at 11.4% yoy, as buyouts were significantly lower this year. On the deposits front, the bank witnessed growth of 14.5 % yoy. CASA accretion was lower than peers at 10.4% yoy, primarily aided by savings deposits, which increased by 12.6% yoy, even as current deposits grew at a subdued pace of 5.6% yoy. The CASA ratio declined by around 150bp yoy to 41.9%. The reported overall NIM improved by 26bp qoq to 3.3%, mainly on account of a 23bp sequential improvement in the domestic NIM to 3.7%, while international NIMs remained stable sequentially at 1.3%. Growth in Non-interest income (excluding treasury) came in modest at 2.2% yoy, as corporate fee income was down more than 30% yoy. During the quarter, the bank registered treasury gains of Rs. 93cr (primarily bond gains, with the equity portfolio witnessing MTM losses) as against Rs. 158cr in 4QFY2012. On the asset quality front, the bank reported flat Gross and net NPA ratio at 3.2% and 0.8%, respectively. During the quarter, the bank restructured loans worth Rs. 788cr, on guided lines, thereby taking its restructured book to Rs. 5,315cr. As per the Management, advances worth Rs. 700cr remain in the pipeline for restructuring.

Outlook and valuation: The bank's substantial branch expansion in the past three to four years and strong capital adequacy has positioned it to grow at least by a few percentage points higher than the average industry growth. Moreover, a lower risk balance sheet has driven down NPA provisioning costs. Further improvement in risk adjusted NIMs and higher growth is expected to drive a 15.5% CAGR in net profit over FY2013-15 and enable a RoE of 15.6% 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 1.71x 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. 1,195/share (2.1x FY2015E ABV). We recommend Buy rating on the stock with a target price of Rs. 1,352.

Source : Equity Bulls

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