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									                                                                                                                                                                             ICICI Bank
                                                                                                                                                                                                   April 27, 2009

                 4QFY09 Result Update
                CMP: INR 433                                                                                                                       Target: INR 590                          OUTPERFORMER
                  Sector View                                                                                      NEUTRAL
                                                                                                                                                Result Highlights
                  Company Risk                                                                                        MEDIUM
                                                                                                                                                   Improvement in NIMs: NIMs have improved to 2.6% for the
                  BSE Sensex                                                                                                    11,329             quarter as against 2.4% for the Q3FY09 as well as Q4FY08.
                  S&P Nifty                                                                                                           3,481        Even on an annual basis, NIMs improved to 2.4% as against
                  BSE Bankex                                                                                                          5,592        2.2% last year. Improvement in NIMs is on account of sharp
                  Bloomberg Consensus                                                                                                              correction in wholesale deposit rates as well as improvement
                  (BUY/SELL/HOLD)                                                                                      25 / 6 / 5
                                                                                                                                                   in CASA. Wholesale deposit accounts for 52% of aggregate
                                                                                                                                                   deposits as against 55% last year.
                  BSE Code                                                                                                    532174
                  NSE Code                                                                                         ICICIBANK                       Agricultural Disbursement helps the balance sheet to grow
                  Bloomberg Code                                                                                   ICICIBC IN                      sequentially: ICICI Bank witnessed 1% growth in balance
                  Reuters                                                                                                   ICBK.BO                sheet after de-growing continuously for three quarters. Major
                  52 Wk High/Low (INR)                                                                                  961 / 253                  growth was seen in agricultural disbursement to meet the year
Result Update

                  Equity (INR Mn)                                                                                               11,133             end target. Excluding agricultural loans, balance sheet has de-
                  Market Cap. (INR Mn)                                                                                       481,485               grown 2% as against last quarter. Such a sequential de-growth
                                                                                                                                                   is in line with the banks’ strategy to go slow on personal
                  Shareholding Pattern (%)
                                                                                                                                                   consumer loan book. All other segment excluding retail have
                  Foreign                                                                                                             63.76
                                                                                                                                                   grown at a decent pace on a yearly basis.
                  Institutions                                                                                                        22.48
                  Corporate                                                                                                            5.76        CASA Rebounds: CASA Deposits have shown a good
                  Public & Others                                                                                                      8.01        rebound after it took hit during the last quarter. CASA
                                                                                                                                                   deposits as a proportion to total deposits increased by 125 bps
                  Returns                                            Abs                            Relative to                                    sequentially to 28.7%. Incremental CASA for the quarter is
                  (%)                                                Perf               Sensex                               Bankex                57%.
                  1 Month                                      18.25                             1.07                                 -4.58
                  3 Months                                     13.41                         -12.41                                   -7.74        Asset Quality continues to disappoint: Slippages continue to
                  1 Year                                     -51.67                          -18.25                               -15.09           remain high, despite Rs 11bn of advances restructured during
                Relative Price Performance
                                                                                                                                                   the quarter. It has further received application for
                                                                                                                                                   restructuring of Rs 20bn. Aggregate restructuring will amount
                  120                                   ICICI Bank                                                 Sensex                          to 1.4% of loan book. It sold Rs 1.5bn of its loans to Arcil.
                                                                                                                                                   Gross NPA as a % of advances increases 18 bps sequentially to
                   80                                                                                                                              Fee Income Sluggish: Fee Income dipped 30% on a yearly
                                                                                                                                                   basis and flat on a sequential basis. Fee income was impacted
                   60                                                                                                                              in the H2FY09 on slowdown in corporate activity resulting in
                                                                                                                                                   lower corporate fees. Even reduced third party distribution
                                                                                                                                                   has impacted the retail fees. Treasury income of Rs 2.1bn to
                                                                                                                                                   some extent supports the non-interest income.













                Source: Khandwala Research, Bloomberg                                                                                           Valuation
                  Analyst: Hatim Broachwala                                                                                                     We retain our ‘OUTPERFORMER’ rating on ICICI Bank with a
                  Email: hatim@kslindia.com                                                                                                     one-year target of Rs 590 by SOTP method.

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Khandwala Securities Limited

Result Highlights

Asset Quality continues to     Asset Quality has remained a concern, off late for ICICI Bank. Although absolute
let down                       Gross NPA has increased just under Rs3 bn, but it is after write off of Rs4bn and
                               sale to Arcil of Rs 1.5bn. Gross addition of Rs12.5bn is in line with trend of earlier
                               quarters. As a % to advances, Gross NPA has increased sequentially by 18 bps to
                               4.32% on account of slowdown in loan book. Management signals increase in
                               NPA on account of aging of advance portfolio, increase in un-collateralized retail
                               business & decrease in loan growth. We expect it to cool down a bit, as interest
                               rate comes down and retail advance as a proportion to total advance also comes
                               down. Retail NPA forms 72% of Gross NPA. Net NPA has also surged by 30% on
                               a yearly basis and 3% on a quarterly basis to Rs46.2bn and as a % to advances it
                               has increased to 2.0% as against 1.5% last year. Low NPL coverage of 54% also
                               remains a concern for the bank

                                                  Gross Addition (LHS)                             Gross NPA                            Net NPA
                                14   (INR Bn)                                                                                                              (%)   5

                                12                                                                                                                               4

                                10                                                                                                                               3

                                 8                                                                                                                               2

                                 6                                                                                                                               1







Re-alignment within loan       With overall slowdown in the economy and increasing risk-profile among
book                           borrowers, ICICI Bank seems to realigning its portfolio. Retail Advances as a %
                               to total advances has been consistently brought down from 58% last year to 49%,
                               which we project to decrease further. Within retail portfolio has been shifted
                               from personal loans to mortgages. Corporate and SME composition have
                               increased by 300 bps on a yearly basis to 16%. International segment has also
                               grown at a decent pace. Agriculture was the major contributor to growth during
                               the quarter. We believe this it to be a conscious decision to slow on business and
                               increase the margins by attracting higher low cost deposits and also diversifying
                               away from retail to Corporate and SME segment thereby decreasing fresh
                                Description                                    INR              Y-o-Y          %’age of Portfolio
                                                                                 Bn        Growth %             Q4’08            Q4’09
                                Retail                                         1,070            (19.0)            58.0                 49.0
                                Corporate/SME                                   349              20.0             13.0                 16.0
                                Agriculture                                     218              28.0                 8.0              10.0
                                International                                   546              14.0             21.0                 25.0
                                Total                                          2,125             (1.0)           100.0                100.0

Khandwala Research                                               ICICI Bank                                                                                          2
                                                                April 27, 2009
Khandwala Securities Limited

Improved NIMs                   3 (%)



                                              Q1              Q2                Q3               Q4    Q1                Q2            Q3             Q4
                                                                            FY2008                                                 FY2009

CASA Rebounds                   3,000       (INR Bn)                   Total Deposit                                           CASA                   (%) 32

                                2,500                                                                                                                        29

                                2,000                                                                                                                        26

                                1,500                                                                                                                        23

                                1,000                                                                                                                        20
                                                Q1                Q2           Q3                Q4   Q1            Q2           Q3             Q4
                                                                            FY2008                                            FY2009

Cost Rationalization           Despite healthy expansion in branches over past 1 year, operating expenses
provides some relief           decreased by 23% to Rs16.6bn. Major cost containment came from direct
                               marketing expenses. Cost to income has been brought down to 43.5% as against
                               48.4% in corresponding quarter last year. It has approval to open 580 additional
                               branches, which should limit further cost rationalization.

                                                   Employee Exp                        DMA Exp              Other Opex                  Cost to Inc (RHS)
                                14,000             (INR Mn)                                                                                            (%)   58

                                10,500                                                                                                                       51

                                    7,000                                                                                                                    44

                                    3,500                                                                                                                    37

                                        0                                                                                                                    30
                                                   Q1             Q2             Q3              Q4   Q1             Q2           Q3             Q4
                                                                             FY2008                                           FY2009

Khandwala Research                                                      ICICI Bank                                                                                3
                                                                       April 27, 2009
Khandwala Securities Limited

Dip in Fee income               48 (YOY%)

continue to disappoint




                                       Q1        Q2          Q3        Q4      Q1        Q2         Q3        Q4
                                                          FY2008                                 FY2009

PAT remain subdued             ICICI Bank has registered a de-growth of 35% in PAT to Rs7.4bn, mainly on
                               account of account of higher provision (mainly NPL provision) of Rs10.8bn and
                               higher effective tax rate. Effective tax rate as a % of PBT increased to 31% against
                               14% in corresponding quarter last year on account of lower capital gains and
                               dividend income. Although asset quality & sluggish fee income disappoints,
                               reasonable treasury profits, higher NIMs and lower operating expenses
                               including direct marketing expenses supports bottom-line to some extent.

Valuation                      Due to change in its strategy from volume based to margin centered along with
                               challenge on NPL front, it will report a subdued PAT in FY10E; however this
                               strategy will pay off in longer term, also considering its plans to expand its
                               branch network which normally break evens over 2-3 years. Concerns on
                               decreasing ROE, dent in its deposit franchise and increase in NPA still remain.
                               At least the bank is well capitalized, as it raised equity at the right time. We value
                               its subsidiaries at Rs.180 per share and core business at Rs.410 per share. We
                               retain our call on ICICI Bank to ‘OUTPERFORMER’ with a one-year target of
                               Rs 590.

Khandwala Research                                     ICICI Bank                                                  4
                                                      April 27, 2009
Khandwala Securities Limited

4QFY09 Result Update
 Particulars                   Q4FY09      Q4FY08         Y-o-Y       FY2009      FY2008      Y-o-Y
 (Rs Millions)                  Mar-09      Mar-08      Growth        Mar-09      Mar-08     Growth
 Interest Earned                 75,297      80,293       -6.2%       310,926     307,884      1.0%
 Interest Expended               53,909      59,498       -9.4%       227,260     234,843     -3.2%
 Net Interest Income             21,388      20,795           2.9%     83,666      73,041     14.5%
 Other Income                    16,737      23,620      -29.1%        76,037      88,112    -13.7%
 - Fee Income                    13,430      19,280      -30.3%        65,240      66,270     -1.6%
 - Other Income                   3,307       4,340      -23.8%        10,797      21,842    -50.6%
 Net Revenue                     38,125      44,415      -14.2%       159,703     161,153     -0.9%
 Operating Expenses              16,570      21,505      -22.9%        70,450      81,542    -13.6%
 - Employee Exp                   4,574       4,666       -2.0%        19,716      20,788     -5.2%
 - DMA Exp                          531       3,584      -85.2%         5,289      15,428    -65.7%
 - Other Exp                     11,465      13,255      -13.5%        45,445      45,326      0.3%
 Operating Profit                21,555      22,910       -5.9%        89,253      79,611     12.1%
 Provision & Contingencies       10,845       9,475       14.5%        38,082      29,046     31.1%
 PBT                             10,710      13,435      -20.3%        51,171      50,565      1.2%
 Taxes                            3,272       1,933       69.3%        13,589       8,984     51.3%
 PAT                              7,438      11,502      -35.3%        37,582      41,581     -9.6%

 EPS (INR)                           6.7        10.3     -35.4%           33.8        39.0   -13.5%
 Book Value (INR)                 445.0       417.5           6.6%      445.0       417.5      6.6%

 Advances                      2,183,110   2,256,160      -3.2%      2,183,110   2,256,160    -3.2%
 Deposits                      2,183,480   2,444,310     -10.7%      2,183,480   2,444,310   -10.7%

Khandwala Research                            ICICI Bank                                              5
                                             April 27, 2009
Khandwala Securities Limited

EQUITY RESEARCH                                                  TEL. NO. +91 22 4076 7373                                  FAX +91 22 4076 7378
Name                                        Designation                    Sectors                                 E-mail
Ashok Jainani                               VP, Head Research              Market Strategy                         ashokjainani@kslindia.com
Dipesh Mehta                                Research Analyst               IT, Telecom                             dipesh@kslindia.com
Hatim K Broachwala                          Research Analyst               BFSI                                    hatim@kslindia.com
Vinay Nair                                  Research Analyst               Energy                                  vinay.nair@kslindia.com
Giriraj Daga                                Research Analyst               Metals & Mining                         giriraj@kslindia.com
Kruti Shah                                  Research Associate             Economics                               kruti.shah@kslindia.com
Sandeep Shrimali                            Research Associate             Cement                                  sandeep.shrimali@kslindia.com
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Ajay G Laddha                               Vice President                                                         ajay@kslindia.com

Corporate Office:                                                                                                  Branch Office:
Vikas Building, Ground Floor,                                                                                      C8/9, Dr. Herekar Park,
Green Street, Fort,                                                                                                Off. Bhandarkar Road,
MUMBAI 400 023.                                                                                                    PUNE 411 004
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Fax No. (91) (22) 4076 7377/78                                                                                     Fax. No. (91) (20) 2567 1405
E-mail: research@kslindia.com                                                                                      Email: pune@kslindia.com

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Khandwala Research                                                      ICICI Bank                                                                       6
                                                                       April 27, 2009

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