Buy ICICI Bank; target of Rs 1273: KRChoksey

KRChoksey is bullish on ICICI Bank and has recommended buy rating on the stock with a target of Rs 1273 in its October 30, 2012 research report.

“ICICI Bank reported strong set of numbers with PAT of Rs1,956 crore, in line with our expectation. NII grew strongly 34.5% y-o-y & 5.6% q-o-q led by steady loan growth of 17.6% y-o-y and stable net interest margins. Fee income continued to be subdued; increased only 0.5% y-o-y due to slowdown in corporate banking fee income which was partially offset by good traction in granular fee income streams. Non interest was also boosted on account of dividend income from subsidiaries (Rs75 crore from ICICI Life). Broadly asset quality has remained stable sequentially; the bank saw fresh slippages of Rs1220 crore (including one large media account amounting to Rs500 cr on which provision made up to 85%). Cost to income remained stable at 41%. Life insurance saw healthy business volume growth with PAT of Rs349crore. General insurance continued to deliver positive net earnings of Rs101 crore. Consolidated PAT grew modestly 20% y-o-y supported by strong parent performance and steady in general insurance business. Maintain BUY.”

“NII grew 34.5% y-o-y & 5.6% q-o-q driven by steady loan growth (17.6% y/y & 2.5% q/q) and steady NIMs. Domestic NIM increased Q-o-Q to 3.42% while overseas NIM declined sharply 38bps to 1.2% on excess liquidity in international balance sheet. We believe NIM is likely to improve ~ 20bps in FY13 on the back of strong growth in retail advances (20% vs. 8% in Fy12), decline in cost of deposits and slower asset re pricing. Consolidated PAT grew strongly by 20% y-o-y to Rs 2390 cr from Rs2077 cr in Q1FY13 driven by strong PAT growth at parent level, steady earnings reported by life insurance and earnings recovery in general insurance. Capital market linked businesses such as asset management, primary dealership and venture capital remained under pressure both top line and bottom line level due to falling volume and competitive pressures.”

“ICICI Bank delivered strong earnings and performed well on most of operating parameters in tough quarter. Impressive NII growth, steady loan growth, stable asset quality, revival retail loan book growth and healthy avg CASA ratios were key positive highlights from the result. Healthy loan growth outlook, improving RoE, margins expansion, trend reversal in retail loan book growth, well capitalized bank and improving life insurance business emerged key value drivers for the stock. We have revised upward our FY13 & FY14 earnings estimates by 2.6% & 0.9% respectively factoring in better margins & higher trading gains. At Rs 1071, the stock is trading at 13x FY14 earnings and 1.8x FY14 adjusted book, attractive valuation given the RoE improvement. We reiterate our BUY rating on the stock with revised TP of Rs 1273,” says KRChoksey research report. 

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