EUR 120.00 For Business Accounts Only

MOSL: Morning India (31/January/19): 1. ICICI Bank (Earnings normalization on track); 2. IOCL (Core refining performance improves); 3. NTPC; 4. Bajaj Auto; 5. Torrent Pharma; 6. LIC Housing Fin; 7. Bharat Elect

MOrning India (31/January/19): 1. ICICI Bank (Earnings normalization on track); 2. IOCL (Core refining performance improves); 3. NTPC; 4. Bajaj Auto; 5. Torrent Pharma; 6. LIC Housing Fin; 7. Bharat Electronics

 

Today’s top research idea

ICICI Bank: Earnings normalization on track, asset quality stabilizing

• 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).
• 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). 
• ICICIBC is in the midst of an improvement in the operating environment (stressed asset resolution and growth pick-up) and is showing healthy signs of earnings normalization. With asset quality stabilizing, credit costs are likely to moderate meaningfully, boosting the return ratios. We cut our FY19/20E earnings by 4.9%/0.3%, and estimate ICICIBC to deliver ~1.4% RoA by FY21. Reiterate Buy with an SOTP-based TP of INR450 (2.1x Sep'20E ABV).

Piping hot news

Fed keeps key rate unchanged and pledges to be 'patient'

The Federal Reserve is keeping its key interest rate unchanged and signaling that it could leave rates alone in coming months given economic pressures and mild inflation. The Fed also says it's prepared to slow the reduction of its bond holdings if needed to help the economy. The central bank said on Wednesday that it plans to be 'patient" about future rate hikes. Its benchmark short-term rate will remain in a range of 2.25% to 2.5% after having been raised four times last year. The Fed's key rate influences many loan rates for businesses and consumers, including mortgages.