Buy ICICI Bank; target of Rs 1270: Angel Broking

Angel Broking is bullish on ICICI Bank and has recommended buy rating on the stock with a target of Rs 1270 in its October 26, 2012 research report.

“ICICI Bank’s 2QFY2013, the advances of the bank increased by 17.6% yoy (2.5%% qoq), aided by a strong 38.5% yoy (16.8% qoq) growth in the corporate book and a 25.1% yoy growth (3.3% qoq decline) in the small and medium enterprise (SME) book. Deposits accretion remained moderate with a growth of 14.8% yoy. The growth in current account – savings account (CASA) deposits, in line with industry trends, was moderate at 10.9% yoy. While savings bank deposits increased by 14.9% yoy, the current account deposits managed to grow only by a muted 2.4% yoy. The reported overall NIM remained flat sequentially at 3.0%, mainly on account of lower international NIMs (1.2% compared to 1.6% in 1QFY2013) despite a 10bp qoq improvement in domestic NIMs.”

"During 2QFY2013, the non-interest income excluding treasury for the bank increased by a muted 2.8% yoy to Rs1,871cr, on the back of continued trends of moderation in the fee income.The bank registered a treasury gain of Rs172cr compared to a loss of Rs80cr in 2QFY2012 on account of proprietary trading gains and nil losses on its security receipt portfolio. During 2QY2013, the annualized slippages ratio for the bank stood at 1.9%, compared to 1.4% in 1QFY2013 and 1.5% in 2QFY2012. The slippages for the quarter stood at Rs1,220cr, of which Rs500cr was on account of the Deccan Chronicle account.”

“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 21.7% CAGR in net profit over FY2012-14E and enable a RoE of 15.7% by FY2014E (with further upside from financial leverage). At the current market price, the bank’s core banking business (after adjusting Rs153/share towards value of the subsidiaries) is trading at 1.8x FY2014E ABV (including subsidiaries, the stock is trading at 1.7x FY2014E ABV). We value the bank’s subsidiaries at Rs153/share and the core bank at Rs1,117/share (2.2x FY2014E ABV). We maintain our buy rating on the stock with a target price of Rs1,270,” says Angel Broking research report.

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