MOSL: ICICI BANK (Buy)-Operating metrics remain stable-asset quality showing gradual recovery

​ICICI Bank: Operating metrics remain stable; asset quality showing gradual recovery

(ICICIBC IN, Mkt Cap USD29.7b, CMP INR301, TP INR355, 18% Upside, Buy)

• ICICIBC reported 2QFY18 PAT of INR20.6b (19% miss), affected by elevated provisions; however, stable margins, in-line slippages and an improvement in the coverage ratio provided comfort. NII grew 9% YoY to INR57.09b (1.5% beat), while core fee growth remained soft at 9% YoY. NIM held stable at 3.27%, and management maintained its >3% NIM guidance for FY18.
• Business growth picked up, with the advances portfolio growing 4% QoQ (flattish in 1QFY18), led by continued traction in retail loans (+19% YoY; ~54% of total loans), and the corporate portfolio growing 5.6% QoQ. Deposit growth, however, stood modest at 2.5% QoQ, even as SA deposits maintained healthy traction (+21% YoY/5% QoQ). CASA mix improved 50bp QoQ to 49.5% (avg. CASA mix at 45.2%).
• Asset quality held largely stable, with GNPLs rising 3% QoQ, but net NPLs declining 4.6% QoQ. PCR improved by 440bp QoQ to ~46%. Fresh slippages stood at INR46.74b (in-line, INR22.87b from one oil & gas account, INR8.79b from a central PSU power company, and INR6.6b from retail), while o/s restructured loans declined to INR20.29b (-14% QoQ; 0.4% of loans).
• ICICIBC has made the entire balance provision of INR6.51b toward the NCLT accounts, while it has disclosed exposure of INR104.76b (98.7% already NPL, non-fund exposure of INR13.84b) toward the second RBI list comprising 18 accounts. The bank carries provisions of 31.5% toward these accounts.