MOSL: ICICI BANK (Buy)-Operating performance on track-Strong PCR to aid earnings normalization
ICICI BANK: Operating performance on track; Strong PCR to aid earnings normalization
(ICICIBC IN, Mkt Cap USD37.3b, CMP INR401, TP INR470, 17% Upside, Buy)
- ICICIBC reported PAT of INR9.7b (significantly below our estimate) in 4QFY19, mainly due to higher provisions of INR54.5b (our estimate: INR33.9b). For FY19, NII grew 17%, while PAT declined 50% YoY to INR33.6b owing to higher provisions (credit cost of ~3.6%).
- NII increased 26.5% YoY to INR76.2b in the quarter, led by a 32bp QoQ improvement in the margin to 3.72%. The NIM was driven by a one-off impact of (a) 20bp on account of income tax refund (INR4.1b) and (b) 5bp due to interest collection from NPLs. On a like-to-like basis, the margin improved 25bp QoQ. Core fee income grew ~15% YoY, with retail forming 74% of total fees.
- Advances rose 14.5% YoY, with domestic book growing by 17% YoY (~22% YoY growth in retail), while the overseas loan mix declined to 10.7%. Deposit growth was healthy at 16.4% YoY. CASA ratio stood at 49.6% v/s 49.3% in 3QFY19, while the average CASA mix stood at 44.6% v/s 46% in 3QFY19 and 45.9% in 4QFY18.
- Fresh slippages stood at INR35.5b, largely due to the technical downgrade of a sugar account, driven by regulatory interpretation. However, healthy recoveries/upgrades of INR15.2b and write-offs of INR73.2b drove a 105bp/52bp QoQ decline in the GNPL/NNPL ratios to 6.7%/2.06%. PCR improved 217bp QoQ to 70.7% (80.7% including TWO). ICICIBC has fund/non-fund based exposure towards IL&FS of INR2.75b/INR5.45b, on which it has provisions of INR1.5b/INR4.68b.
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.
Motilal Oswal Financial Services Ltd. is a reputed name in Financial Services and Online Trading with group companies providing services such as Private Wealth Management, Retail Broking and Distribution, Institutional Broking, Asset Management, Investment Banking, Private Equity, Commodity Broking, Currency Broking, Principal Strategies & Home Finance.
Motilal Oswal Securities is a group company of Motilal Oswal Financial Service Limited which started as a stock trading company and has blossomed into well diversified firm offering a range of financial products and services. Motilal Oswal has built a reputation as the source for best stock trading company and this has taken a wealth of experience, knowledge and expertise, constantly working in tandem, over the years.
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