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ICICI Bank 3QFY2012 performance highlights and results update

Contributed by Angel Broking

For 3QFY2012, ICICI Bank posted a healthy set of numbers with net profit growing by 20.3% yoy to Rs.1,728cr, which were above street estimates. Marginal sequential increase in overall NIMs driven by expansion in overseas NIMs and improvement in asset quality were the key highlights of the results. We maintain our Buy recommendation on the stock.

Improvement in NIMs and asset quality: Advances for the bank increased by 5.2% qoq (19.1% yoy). Deposits accretion also showed traction, registering a growth of 6.3% qoq (a muted 19.7% yoy). CASA deposits growth was healthy at 18.0% yoy, driven by a 26.4% yoy increase in current account deposits (strong 21.3% qoq). Saving account deposits growth was relatively lower at 13.8% yoy (4.8% qoq). On account of sharp rise in current account deposits during 3QFY2012, CASA ratio for the bank increased by 148bp qoq to 43.6%. Domestic NIMs improved marginally by 6bp to 3.0%; while, overseas NIM improved by 31bp qoq to 1.4%. During 3QFY2012, other income excluding treasury rose by a moderate 13.3% yoy (up a healthy 7.6% yoy) on the back of muted fee income growth of 4.7% yoy. The sequential rise in other income was mainly on account of Rs.150cr of dividend income received from life insurance business for 1HFY2012. The bank’s asset quality improved during 3QFY2012 with both gross and net NPA levels declining by 3.0% and 6.2% sequentially, respectively. The NPA coverage ratio remains healthy at 78.9%. The bank restructured Rs.880cr worth of accounts during 3QFY2012 taking the outstanding restructured book to Rs.3,070cr. The bank is expecting ~Rs.1,300cr of restructuring through CDR mechanism further in 4QFY2012, which will include accounts such as GTL and 3I InfoTech.

Outlook and valuation: The bank’s substantial branch expansion in the past 24 months is expected to sustain a far more favourable deposit mix going forward. Moreover, a lower risk balance sheet has driven down NPA provisioning costs, which we believe will enable RoE of 14.5% by FY2013E (with further upside from financial leverage). At the CMP, the bank’s core banking business (after adjusting for subsidiaries) is trading at 1.7x FY2013E ABV (including subsidiaries, at 1.6x FY2013E ABV). We maintain Buy on the stock with a target price of Rs.1,061.