Hold ICICI Bank; target of Rs 1100: Emkay

Emkay Global Financial Services has recommended hold rating on ICICI Bank with a target of Rs 1100, in its October 26, 2012 research report.

“ICICI Bank Q2FY13 NII at Rs33.7bn (+35% yoy) was marginally ahead of our / street est. and was aided by stable margins at 3% (stable qoq) and 18% yoy (2.5% qoq) growth in loan portfolio. Dividend income from life insurance subsidiary of Rs750mn and treasury gains came at the rescue of yet another quarter of muted fee income growth. With adequate cost controls (cost/income ratio at 41%) and stable provisioning (~74bps annualized), net profit at Rs19.6bn (+30% yoy) was inline with our estimates. Asset quality remains stable with GNPA at Rs100bn (+2% qoq). Fresh slippages at Rs7.2bn (1.0% annualized) after adjusting for one large account in media space of Rs5bn are in tandem with historical run-rate of Rs7-8bn per quarter. Mgmt has provided for upto 85% on that media account and does not foresee any major pain in H2FY13. However, with ~200bps qoq decline in PCR to 78.7%, NNPA at Rs21.3bn was up 12% qoq. Bank restructured loans of Rs1.4bn in Q2 vs Rs3.5bn in Q1. Restructured pool stands declined to Rs41.5bn (1.5% of loans) with outstanding pipeline of Rs5bn.”

“Domestic NIM at 3.43% expanded 20bps qoq and compensated for sharp 38bps qoq decline in international NIM to 1.22%, thereby resulting in flat 3% margins qoq. International margins declined due to excess liquidity arising out of bond redemption. With stabilization of margins in the international business in H2FY13, we expect FY13 margins at 2.8% (calc), up from 2.4% in FY12. Q2FY13 deposit growth at 15% yoy was primarily led by 18% yoy growth in term deposits against mere 11% yoy growth in CASA deposits. While CASA ratio continues to hover at ~41% levels (Axis Bank – 40.5%, HDFC Bank – 45.9%), average CASA has eased by 190bps qoq to 37.5%. Management has outlined for CASA target at 38-40% for FY13.”

“ICICI Bank Q2FY13 results continue to provide comfort in terms of a) improving domestic loan mix b) sustainable margins at 3% for consecutive the third quarter now c) stable asset quality with adequate provisioning and d) improving returns profile – calc RoA at 1.6% and RoE at 12.6%. We have raised our NII estimates by 4% each for FY13/FY14 each and net profit estimates by 0.8% and 4.4% for FY13E and FY14E respectively. We expect the bank to deliver a RoA in excess of over 1.6% for the said period. Driven by confidence in the earnings we have valued the bank at 2x FY14 bank standalone ABV and arrive at a target price of Rs1100. Maintain HOLD,” says Emkay Global Financial Services research reports.    

Shares held by Mutual Funds/UTI   

Disclaimer: The views and investment tips expressed by investment experts/broking houses/rating agencies on moneycontrol.com are their own, and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.

To read the full report click on the attachment

Read More