MOSL: ICICI BANK (Buy)- Stress pool stable QoQ-NIM and growth disappoint
​ICICI Bank: Stress pool stable QoQ; NIM and growth disappoint
(ICICIBC IN, Mkt Cap USD30.7b, CMP INR307, TP INR366, 19% Upside, Buy)
ICICIBC reported PAT of INR20.5b, 14% below our estimate due to lower-than-expected NII and higher-than-expected provisioning. Core PPoP grew 6% YoY, aided by 10% YoY growth in core fee income. Key highlights: a) NII performance was tepid with -6%/8% QoQ/YoY growth on the back of muted loan growth and 15bp QoQ (one-off interest in 4Q) contraction in NIM. b) A large electronic account (INR16-18b) was recognized outside watch-list, impacting overall reported NPAs. c) Pool of net stressed loans (NNPA + other forms of stress loans) was flat QoQ at INR535b (11.5% of loans v/s 11.8% in 4Q). d) Average daily CASA ratio remained healthy at 45.4%.
Slippages during the quarter were INR49.8b, of which INR30b came from outside the watch list, led by one large lumpy account. However, this exposure had been highlighted by management earlier. Excluding this, slippages continued to moderate to ~INR24.8b, as against INR59b in 4QFY17 (excluding lumpy cement slippage) and ~INR70b in 3QFY17. Upgrades and recoveries doubled during the quarter to INR27.8b, helped by one-off recovery of a large cement account.
Other highlights: (1) The bank had total exposure of INR72.4b to IBC accounts, 97% of which was secured; ICICIBC has PCR of 41% against this book. (2) The bank will need to provide additional INR6.47b for these exposures through FY18. (3) Management guided for domestic loan growth of 16%-18%, NIM contraction of ~20bp and fee income growth in low-teens.
ICICI Bank Limited is a banking company. The Bank is engaged in providing a range of banking and financial services, including commercial banking, retail banking, project and corporate finance, working capital finance, insurance, venture capital and private equity, investment banking, broking and treasury products and services. The Bank's business segments are Retail banking, Wholesale banking, Treasury, Other banking, Life insurance, General insurance and Others. It has a network of approximately 18,210 branches and automated teller machines (ATMs). The Bank has approximately 110 Touch Banking branches across over 30 cities. Its international banking is focused on providing solutions for the international banking requirements of its Indian corporate clients and leveraging economic corridors between India and the rest of the world. The Bank caters to the financial needs of women entrepreneurs through its Self-Help Group (SHG) program as a part of its microfinance initiatives.
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