MOSL: ICICI BANK (Buy)-Earnings normalization on track, asset quality stabilizing
ICICI Bank: Earnings normalization on track, asset quality stabilizing
(ICICIBC IN, Mkt Cap USD33.1b, CMP INR365, TP INR450, 23% Upside, Buy)
- PAT stood at INR16.0b in 3QFY19, lower than our estimate of INR20.7b due to higher provisions of INR42.4b (our estimate: INR33.9b). Asset quality improved, with fresh slippages moderating to INR20.9b (our estimate: INR30b).
- NII grew 20.5% YoY to INR68.7b in the quarter. Margin improved 7bp QoQ to 3.4%, mainly led by a healthy recovery in one of the large NPL accounts (+17bp impact). Core fee income grew ~16% YoY, with retail forming 73% of total fees.
- Advances grew ~12% YoY, with the domestic book growing by 14% YoY (22% YoY growth in retail loans; portfolio buyout of INR68.5b). Overseas book declined by 5.4% YoY, with the mix down to 11.9%. Deposit growth was also healthy at 17% YoY (CASA growth of 15% YoY). CASA ratio stood at 49.3% v/s 50.8% in 2QFY19.
- Fresh slippages moderated sharply to INR20.9b. This, along with healthy recoveries/upgrades and resolution, drove a 79bp/107bp QoQ decline in the GNPL/NNPL ratios to 7.75%/2.58%. ICICIBC sold INR21.5b of NPLs on a cash basis, which further contributed to NPL reduction. PCR rose sharply by 903bp QoQ to 68.5% (~76% incl. TWO). ICICIBC carries healthy coverage of 89.6%/71.4% on NCLT list-1/list-2 (total exposure: INR126.4b fund-based and INR8.6b non-fund based). Quantum of BB and below loans declined to INR188b (INR217.9b in 2QFY19).
- Other highlights: (a) Share of retail loans stood at 59% (+170bp QoQ). (b) BB and below assets accounted for 93% of total corporate slippages of INR10.2b. (c) Opex increased by 21% YoY due to retiral provisions.
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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