Tuesday, February 7, 2012

>ICICI BANK: Asset quality remained healthy

ICICI Bank (ICICIBC) 3QFY12 PAT grew 20% YoY and 15% QoQ to INR17.3b (10% above est. of INR15.8b) driven by lower than expected operating expenses, provisioning expenses and higher other income due to maiden dividend of INR1.5b from life insurance subsidiary. Adjusting for dividend, PAT was in line. Key highlights:

 Margins improve QoQ: NIM improved by ~10bp QoQ to 2.7%. International margins improved substantially (~30bp QoQ) to 1.4%, while the domestic margins improved to 2.98% from 2.92% in 2QFY12.
 Loan growth remains healthy: Loans grew ~5% QoQ and ~19% YoY to INR2.46t. Domestic loans grew 6% QoQ and 13% YoY led by strong growth in corporate loan segment (up 22% YoY and 15% QoQ). Growth in international loan book on reported basis was 38% YoY; however, adjusting for currency impact, growth was 16% YoY.
 Average CASA ratio improves: The calculated CASA ratio improved to 43.6% from 42.1% in 2QFY12 on account of strong 21% QoQ increase in CA deposits (due to availability of float for NHAI bonds issue) and 5% QoQ increase in SA deposits. Average CASA ratio improved to 39% from 38.3% in 2QFY12.
■ Asset quality improves: Asset quality improved sequentially with absolute GNPAs declining by 3% QoQ. Gross slippages during the quarter were INR8.77b. Credit cost stood at ~58bp largely stable on a QoQ basis. Net restructured loans increased to INR30b from INR25b in 2QFY12.

Valuation and view: After a period of consolidation over the past two years, focus has shifted to loan growth with corporate and secured retail loans being key drivers. Over FY12/13, domestic business growth will be in-line with industry average while CASA ratio will remain at ~40%. Stable/improving margins, control over cost-to-income ratio and fall in credit costs will ensure RoA of ~1.5% over FY12/13. Maintain Buy.

To read the full report: ICICI BANK