Buy ICICI Bank; target of Rs 1230: Motilal Oswal

Motilal Oswal is bullish on ICICI Bank and has recommended buy rating on the stock with a target of Rs 1230 in its October 29, 2012 research report.

“ICICI Bank’s (ICICIBC) 2QFY13 PAT grew 30% YoY to INR19.6b (7% above estimate). Healthy NIM of 3% (stable QoQ), strong domestic loan growth (+5.6% QoQ), lower provisions despite providing 85% on large media account exposure of INR5b, and higher than expected trading gains (INR1.7b v/s loss of INR210m a quarter ago) led to higher than expected PAT.”

“Domestic NIM expanded 10bp QoQ to 3.4%, a positive surprise. However, a sharp fall of 38bp QoQ in international NIM to 1.2% led to overall NIM being stable QoQ.  Fee income was flat YoY (up 4% QoQ) at INR17.1b, despite healthy asset growth, which was disappointing.  Domestic loan growth was strong at 22% YoY (+6% QoQ – a positive), led by strong traction in domestic corporate loans (+16.5% QoQ and 38.4% YoY; adjusted for inter-bank participation certificates, corporate loan growth was 27% YoY) and pick-up in retail loans (+2% QoQ and 14% YoY).”

“We expect cost to income ratio to be maintained at 41-42% over next two years, translating into core operating profit CAGR of ~20% over FY12-14 v/s 7% over FY09-12. In effect, RoA is likely to remain strong at ~1.6% over FY13/14, whereas core RoE should increase from 11% over FY08-12 to ~15% in FY14 led by increasing leverage and strong RoA. ICICIBC has maintained strong capitalization, with tier-I at 12.8%. Retain as top pick, with an SOTP-based target price of INR1,230,” says Motilal Oswal research report.

Non-Institutions holding more than 90% in Indian cos

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