New York: 02:35 || London: 07:35 || Mumbai: 11:05 || Singapore: 13:35

Recommendations India

ICICI Bank 1QFY2015 performance highlights and results update

August 5, 2014, Tuesday, 13:10 GMT | 08:10 EST | 16:40 IST | 19:10 SGT
Contributed by Angel Broking

ICICI Bank reported a healthy set of numbers for 1QFY2015 with net profit growth of 16.8% yoy, at Rs.2,655cr. The key highlights of the results are a) 17.6% yoy growth in NII on back of healthy loan book growth of 15.2% yoy b) 13bp yoy growth in NIM to 3.4% c) 14.7% yoy growth in non-interest income on back of higher dividend from ICICI Life d) fresh stressed asset addition of Rs.2,589cr for the quarter, while the Management had guided for lower stressed assets in this fiscal year than last year.

NIM rises sequentially; Asset quality largely stable: During 1QFY2015, the bank’s advances grew by 15.2% (2.5% qoq), aided by healthy retail loan book growth of 26.7% yoy. As a result, the contribution of the retail segment has increased from 36% of total loan book in 1QFY2014 to 39.6% in 1QFY2015. Domestic corporate advances continued to grow at a subdued pace of 7.7% yoy, while overseas loans grew by 9.6% yoy. The growth in deposits (15.3% yoy) outpaced the system growth with CASA deposits growing by 14.8% yoy. As a result, the average CASA ratio improved by 50bp yoy to 39.5%, thereby increasing the NIM to 3.4% for 1QFY2015. Domestic NIM improved to 3.8% as compared to 3.6% in 1QFY2014, whereas overseas NIM was stable at 1.6%. The non-interest income (excluding treasury) for the bank grew strong at 18.3% yoy, aided by strong growth in income under the ‘others’ head (which mainly includes dividend from subsidiaries), even as fee income grew at a moderate pace. During the quarter, the bank witnessed slippages of Rs.1,195cr (annualized slippages ratio of 1.7%; flat sequentially), while fresh restructuring during the quarter was at Rs.1,394cr. The Gross NPA ratio and the Net NPA ratio increased 2bp each sequentially to 3.1% and 1.0%, respectively. As per the Management, advances worth Rs.1,500cr remain in the restructuring pipeline for CDR, while it guided for credit costs as a percentage of average advances at ~ 90bp for FY2015.

Outlook and valuation: At CMP, the bank’s core banking business (after adjusting Rs.206/share towards value of subsidiaries) is trading at 1.9x FY2016E ABV. From a structural point-of-view, keeping in mind its robust franchise and capital adequacy position, the bank is well positioned to grow by at least a few percentage points higher than the average industry growth, as and when the business environment turns conducive. We maintain our Buy recommendation on the bank with a price target of Rs.1,895.