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MOSL: ICICI BANK (Buy)-Robust performance-on track to achieve near-term RoE target

ICICI BANK: Robust performance; on track to achieve near-term RoE target

(ICICIBC IN, Mkt Cap USD42.7b, CMP INR469, TP INR550, 17% Upside, Buy)

 

• ICICIBC reported 2QFY20 PAT of INR6.5b (-28% YoY), higher than our estimate of INR4.5b, led by strong NII and other income. Adjusted for the DTA reversal of INR29.2b, PAT would have been INR35.8b. PBT was at INR43.7b (in-line). For 1HFY20, PPoP grew 19% YoY to INR131.6b, while PAT came in at INR25.6b compared to INR7.9b in 1HFY19.
• NII increased 25.6% YoY to INR80.5b, led by 12.6% YoY loan growth and ~15bp QoQ expansion in the core NIM. Other income grew 33% YoY, whereas core fee income increased ~16% YoY to INR34.8b (retail forms 74% of total fees). Total income thus grew 28% YoY to INR122.5b (in-line). Opex increased 24% YoY as the bank incurred higher employee expense (due to higher retiral provisions) and added 346 branches in 2QFY20. PPoP thus grew 31% YoY (core PPoP: +24% YoY).
• Advances grew 12.6% YoY, with the domestic book growing at 16% YoY (~22% YoY growth in retail), while the overseas loan mix declined to 9.8%. Deposit growth was healthy at 24.6% YoY. Despite term deposit growth of 35% YoY, the CASA mix improved to 46.7% from 45.2% in 1QFY20 (120bp decline on an average basis).
• Fresh slippages moderated to INR24.8b, led by a reduction in both retail (INR13.2b) and corporate (11.59b) slippages. GNPL/NNPL ratios thus improved by 10bp/20bp QoQ to 6.4%/1.6%. PCR improved 200bp QoQ to 76.1% (85.0% including TWO). BB and below book increased 5% QoQ to INR160.7b, led by rating downgrade of INR20.7b.