ICICI Bank (BUY): Steady asset quality; hard to sustain credit costs - Ambit

ICICI Bank's 1QFY14 net profit at Rs22.7bn increased 25% YoY, in line with our estimates. However, operating profits at Rs38bn were 10% above our estimates owing to treasury gains of Rs4bn. ICICI Bank's asset quality remained steady - gross NPAs remained flat at 3.2%. Modest YoY loan growth at 12% was primarily due to a 20% YoY growth in the domestic corporate book, with YoY retail growth at 13% (lower growth due to bought-out portfolios during the base year). Whilst we remain skeptical about ICICI Bank's ability to contain its FY14 credit costs within 75bps and we do not share the management's optimism on double-digit fee income growth, we expect the NIM expansion to offset higher corporate delinquencies and help stabilise standalone RoAs at 1.6%. At a valuation of 1.5x our one-year forward ABVPS, we reiterate our BUY stance with a valuation of Rs1,295 (two-thirds of this valuation is derived from the standalone lending business), implying a 42% upside.

Source : Equity Bulls

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