icici bank ltd. - moneycontrol.com

ICICI Bank Ltd.

RESULT UPDATE 8th May, 2019

2 Page

ICICI Bank Ltd. CMP

INR 386 Target

INR 440 Potential Upside

13.9% Market Cap (INR Mn)

2,587,988 Recommendation

Accumulate Sector

Banking

Shares outs (Mn) 6,447

Equity Cap (INR Mn) 1,083,634

Mkt Cap (INR Mn) 2,587,988

52 Wk H/L (INR) 411/256

Volume Avg (3m K) 15,500

Face Value (INR) 2

Bloomberg Code ICICIBC IN

MARKET DATA

SHARE PRICE PERFORMANCE

SENSEX 38,276

NIFTY 11,498

MARKET INFO

KEY FINANCIALS

Source: Company, KRChoksey Research

Result highlights

• ICICI Bank delivered 14.5% YoY growth in advances while deposit mobilization clocked a solid 16.4% YoY growth in Q4 FY19.

• Domestic loan book growth of 16.9% YoY was primarily driven by Retail loans which grew 21.7% YoY and accounted for 60% of the total advances.

• NII stood at INR 27,015 Cr., up 17.3% YoY for FY19 and for Q4FY19, the NII came at INR 7,620 Cr., up by 26% YoY/+10% QoQ. NIMs at 3.58% in Q4FY19 expanded 45 bps YoY (up 18bps QoQ).

• Retail business supported the bank’s asset yields (+72 bps YoY) in Q4FY19 at 8.12% for Q4 FY19 while cost of funds declined by 25 bps sequentially to 4.76% on account of higher CASA deposits.

• Bank’s asset quality improved with GNPA levels down to 6.7% in Q4 FY19, reducing by 214 bps/49 bps on a YoY/QoQ basis, respectively.

• Overall, PPOP at INR 23,438 Cr. was down 7.7% YoY for FY19 due to high operating expenses while PAT almost halved to INR3,363 Cr on higher provisions.

SHARE HOLDING PATTERN (%)

NII CAGR between FY19 and FY21E

8.8%

PPOP CAGR between FY19 and FY21E

16.6%

Retail book driving lending growth; Positive cues on deposit mobilization

ICICI Bank’s retail loan book grew by 21.7% YoY, led by growth in Personal loans (+49% YoY), Credit Cards (+31% YoY), and Homes Loans (+18.8% YoY) which constituted almost half of the retail loans. The bank benefitted from tax benefits from the government under low cost housing schemes. The bank strategically weakened its corporate loan portfolio which grew marginally by 5.7% YoY while SME lending remained strong at 20% YoY growth. Alongside growth in loan book, deposit mobilization also grew by a healthy 16.4% YoY in Q4FY19. Higher deposits with CASA growing by 13.1% has helped the bank focus more aggressively towards retail lending. We see further room for growth in the credit card business as the bank derive benefit from new partnerships with online retailers and personal loans backed by credit cards. The CASA ratio fell to 49.6%, declining by 207 bps on a YoY basis.

Robust growth in NII well supported by Fee Income; Expanding NIMs despite higher funding costs

NII grew 27% YoY/+11% QoQ in Q4 FY19 to INR 7,620 Cr. (+17% YoY to INR 27,015 Cr. for FY19). Income growth was also supported by moderate expansion in margins. NIMs at 3.72% in Q4 FY19 expanded 59 bps YoY (up 32bps QoQ). Margin expansion was driven by the bank’s retail business which supported the overall asset yields (+61 bps YoY) during Q4 FY19 which was partly offset by an moderate increase in cost of funds (at 5.2%; +55 bps YoY) on account of more term deposits. The bank’s fee income grew 15% YoY to INR 3,178 Cr. which supported the total income in Q4FY19.

Asset quality improved as heavier provisioning continued on stressed books

Asset quality improved with GNPAs levels down to 6.70% in Q4 FY19, reducing by 214 bps/105 bps on a YoY/QoQ basis, respectively. PCR now stands at 81% in Q4Fy19 (vs. 61% in Q4FY18). The tighter provisioning of several specific accounts on bank’s internal assessment along with some recoveries going forward is expected to support the overall bottom-line performance. ICICI bank’s improving asset quality should help regain investor confidence while retail focus should help the bank address any material asset quality deterioration.

Recovering from tough times

India Equity Institutional Research II Result Update – Q4FY19 II 8th May, 2019

Phone: +91-22-6696 5555, Fax: +91-22-6691 9576 www.krchoksey.com

KRChoksey Research is also available on Bloomberg KRCS<GO>

Thomson Reuters, Factset and Capital IQ

ANALYST Parvati Rai, [email protected], +91-22-6696 5413

80

120

160

200

Jan

-14

Jul-1

4

Jan

-15

Jul-1

5

Jan

-16

Jul-1

6

Jan

-17

Jul-1

7

Jan

-18

Jul-1

8

Jan

-19

ICICI Bank NIFTY 50

Particulars Mar 19 Dec 18 Sep 18

Promoters 0.00 0.00 0.00

FIIs 43.05 42.71 45.28

DIIs 45.75 46.37 44.23

Others 11.20 10.92 10.49

Total 100.00 100.00 100.00

Particulars (INR Crores) FY17 FY18 FY19 FY20E FY21E

NII 21,737 23,026 27,015 29,846 31,989

PPOP 27,964 25,399 23,438 28,886 31,892

PAT 9,801 6,777 3,363 11,715 13,583

EPS 16.83 10.46 5.17 18.17 21.07

NIM 3.2% 3.1% 3.2% 3.2% 3.2%

Advances Growth 6.7% 10.4% 14.5% 15.0% 14.0%

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ICICI Bank Ltd.


Valuation and view

We expect ICICI Bank to deliver NII growth of average 9% YoY in FY20E/FY21E on back of its renewed focus on retail business (network of 4,874 branches and 14,987 ATMs). In fact, the bank has moderated its pace of retail franchisee build up (opened net 7 new branches vs. 17 in FY18) which should benefit the cost front, while improving branch metrics (led by strong retail loan growth) should drive C/I ratio lower (forecast to ~40% in FY20/21). Better pricing on retail products should support overall asset yields while rising mix of term deposits should keep CoF elevated at close to 5.0% levels. Overall, we expect NIMs to average 3.2% in FY20/21. Higher fee income should support the overall operating income growth (+13% average for FY20/21). Asset quality metrices are forecast to improve credit costs expected to be ~1.6% , PCR at 60-65% and Net NPA expected to remain ~2.0% in the forecast period. ICICI Bank is currently trading at a P/Adj.BV multiple of 2.1x/1.9x on FY20E/FY21E adj. book value and we expect the valuation discount for the bank to continue on back of weak ROE outlook (~10% for FY20/21). We apply a P/Adj.BV multiple of 1.8x to the FY21 adj. BVPS of INR 183 (as we believe the provisions will be more normalized in FY21) to arrive at a standalone valuation (~75% of group valuation). We use SOTP approach (adding for its subsidiaries/holdings) to arrive at a target price of INR 440 per share, an upside of 13.9% over the CMP. Accordingly, we assign an “Accumulate” rating.

Key Con-call Highlights: (i) ICICI bank to remain focused towards growth in retail loan segment in the near future while corporate loan disbursements are expected to remain restricted to only A- and above rated accounts. (ii) Digital channels accounted for over 86% of the savings account transactions in FY2019 (iii) The bank’s retail fee income grew by 15.3% YoY and is expected to increase from the current three-fourth share of overall fee income. (iv) The bank has reduced the NPA’s from Corporate and SME loan portfolios from INR25,801 Cr. at end of FY18 to INR7,443 Cr. by end of FY19. (v) Management expects the Credit Costs to come down sharply during FY20 between 1.2-1.3% of average advances. (vi) On the returns front, the Management aims to achieve an ROE of 15% by FY20 end (vi) The Management acknowledged provisioning of IL&FS exposure of INR 276 Cr. as NPA as per RBI guidelines (of which INR 146 Cr. has been provided for) while the bank’s exposure to top 10 groups stood at 13.6% in FY19 as against 18.5% in FY16. (vii) Capital adequacy ratios were well above the minimum regulatory requirement with Tier I ratio of 15.1% and total capital adequacy ratio at 16.9% as of FY19. (ix) Subsidiaries: Among the different subsidiaries in ICICI’s holdings, it was a mixed show with general insurance business delivering growth in profits while the life insurance and securities business posted negative growth in profitability. (x) The Board also approved fundraising plans (via issuance of debt securities of up to INR 25,000 crore) from the domestic markets and up to USD 3.0bn from offshore markets (through public or private placement) within a period of one year.

Exhibit 1: Profit & Loss Statement


KEY FINANCIALS





INR Crores FY 17 FY 18 FY 19 FY 20E FY 21E

Interest Income 54,156 54,966 63,401 72,244 80,215

Interest Expense 32,419 31,940 36,386 42,398 48,226

Net Interest Income 21,737 23,026 27,015 29,846 31,989

Non interest income 19,504 17,420 14,512 18,441 20,625

Operating income 41,242 40,445 41,527 48,288 52,614

- Employee expense 5,734 5,914 6,808 7,198 7,991

- Other operating expense 7,544 9,133 11,281 12,204 12,731

Operating Expense 13,278 15,047 18,089 19,402 20,722

PPOP 27,964 25,399 23,438 28,886 31,892

Provisions 16,686 17,964 19,661 14,242 14,914

PBT 11,279 7,435 3,777 14,644 16,978

Tax Expense 1,478 657 413 2,929 3,396

PAT 9,801 6,777 3,363 11,715 13,583

Diluted EPS (INR) 16.83 10.46 5.17 18.17 21.07

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ICICI Bank Ltd.



Exhibit 2: Balance Sheet





INR Crores FY17 FY18 FY19 FY20E FY21E

Source of Funds

Share capital 1,165 1,286 1,289 1,289 1,289

Reserves & Surplus 98,780 1,03,868 1,07,074 1,17,822 1,31,405

Networth 99,945 1,05,153 1,08,363 1,19,111 1,32,694

ESOP 6 6 5 5 5

Borrowings 1,47,556 1,82,859 1,65,320 1,68,626 1,71,999

Deposits 4,90,039 5,60,974 6,52,920 7,50,858 8,55,978

Other liabilities & provisions 34,245 30,196 37,851 45,979 46,372

Total Equity & Liabilities 7,71,791 8,79,189 9,64,459 10,84,579 12,07,047

Uses of Funds

Cash & Balances w/ RBI 31,702 33,102 37,858 43,310 48,611

Balances w/ banks & others 44,011 51,067 42,438 61,791 67,970

Investments 1,61,507 2,02,994 2,07,733 2,06,486 2,13,994

Loans & advances 4,64,232 5,12,395 5,86,647 6,74,644 7,69,094

Fixed assets 7,805 7,904 7,931 8,311 8,337

Other assets 62,535 71,727 81,852 90,037 99,041

Total Assets 7,71,791 8,79,189 9,64,459 10,84,579 12,07,047

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ICICI Bank Ltd.


Exhibit 3: Ratio Analysis






Key Ratio FY17 FY18 FY19 FY20E FY21E

Growth Rates

Advances (%) 6.7% 10.4% 14.5% 15.0% 14.0%

Deposits (%) 16.3% 14.5% 16.4% 15.0% 14.0%

Total assets (%) 7.1% 13.9% 9.7% 12.5% 11.3%

NII (%) 2.4% 5.9% 17.3% 10.5% 7.2%

Pre-provisioning profit (%) 17.2% -9.2% -7.7% 23.2% 10.4%

PAT (%) 0.8% -30.9% -50.4% 248.3% 15.9%

B/S Ratios

Credit/Deposit (%) 94.7% 91.3% 89.8% 89.8% 89.8%

CASA (%) 50.4% 51.7% 49.6% 47.8% 46.5%

Advances/Total assets (%) 60.1% 58.3% 60.8% 62.2% 63.7%

Leverage - Total Assets to Equity 7.72 8.36 8.90 9.11 9.10

Operating efficiency

Cost/income (%) 32.2% 37.2% 43.6% 40.2% 39.4%

Opex/total assets (%) 1.7% 1.7% 1.9% 1.8% 1.7%

Opex/total interest earning assets 2.0% 2.0% 2.2% 2.1% 2.1%

Profitability

NIM (%) 3.2% 3.1% 3.2% 3.2% 3.2%

RoA (%) 1.3% 0.8% 0.4% 1.1% 1.2%

RoE (%) 10.3% 6.6% 3.2% 10.3% 10.8%

Asset quality

Gross NPA (%) 8.8% 10.1% 7.9% 8.0% 8.3%

Net NPA (%) 5.4% 5.4% 2.3% 2.1% 1.9%

PCR (%) 40.2% 47.0% 70.6% 60.0% 65.0%

Slippage (%) 7.9% 6.8% 6.0% 5.0% 5.0%

Credit cost (%) 2.5% 2.6% 2.6% 1.7% 1.6%

Per share data / Valuation

EPS (INR) 16.83 10.46 5.17 18.17 21.07

BVPS (INR) 171.59 163.59 168.08 184.75 205.81

ABVPS (INR) 128.30 120.30 147.02 162.45 183.32

P/E (x) 15.5 36.6 74.0 21.3 18.3

P/BV (x) 1.5 2.4 2.3 2.1 1.9

P/ABV (x) 2.0 3.2 2.6 2.4 2.1

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ICICI Bank Ltd.


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KRChoksey Shares and Securities Pvt. Ltd Registered Office:

1102, Stock Exchange Tower, Dalal Street, Fort, Mumbai – 400 001. Phone: +91-22-6633 5000; Fax: +91-22-6633 8060.

Corporate Office: ABHISHEK, 5th Floor, Link Road, Andheri (W), Mumbai – 400 053.

Phone: +91-22-6696 5555; Fax: +91-22-6691 9576.





ANALYST CERTIFICATION:

I, Parvati Rai (MBA-Finance, M.com), Head Research, author and the name subscribed to this report, hereby certify that all of the views expressed in this research report accurately reflect my views about the subject issuer(s) or securities. I also certify that no part of our compensation was, is, or will be directly or indirectly related to the specific recommendation(s) or view(s) in this report.

Terms & Conditions and other disclosures:

KRChoksey Shares and Securities Pvt. Ltd (hereinafter referred to as KRCSSPL) is a registered member of National Stock Exchange of India Limited and Bombay Stock Exchange Limited. KRCSSPL is a registered Research Entity vides SEBI Registration No. INH000001295 under SEBI (Research Analyst) Regulations, 2014.

We submit that no material disciplinary action has been taken on KRCSSPL and its associates (Group Companies) by any Regulatory Authority impacting Equity Research Analysis activities.

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The information and opinions in this report have been prepared by KRCSSPL and are subject to change without any notice. The report and information contained herein is strictly confidential and meant solely for the selected recipient and may not be altered in any way, transmitted to, copied or distributed, in part or in whole, to any other person or to the media or reproduced in any form, without prior written consent of KRCSSPL. While we would endeavor to update the information herein on a reasonable basis, KRCSSPL is not under any obligation to update the information. Also, there may be regulatory, compliance or other reasons that may prevent KRCSSPL from doing so. Non-rated securities indicate that rating on a particular security has been suspended temporarily and such suspension is in compliance with applicable regulations and/or KRCSSPL policies, in circumstances where KRCSSPL might be acting in an advisory capacity to this company, or in certain other circumstances.

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ICICI Bank Ltd

Date CMP (INR) TP (INR) Recommendation

08-May-19 386 440 ACCUMULATE

31-Jul-18 303 389 BUY

08-May-18 308 393 BUY

30-Oct-17 303 395 BUY

31-Jul-17 296 395 BUY 6-Feb-17 285 338 BUY 9-Nov-16 268 338 BUY 1-Aug-16 263 300 ACCUMULATE 2-May-16 230 280 ACCUMULATE 29-Jan-16 233 314 BUY 2-Nov-15 277 345 BUY 29-Apr-15 327 400 BUY 13-Apr-15 318 400 BUY 2-Feb-15 352 400 ACCUMULATE 7-Jan-15 348 403 ACCUMULATE 3-Nov-14 334 363 ACCUMULATE 8-Oct-14 286 345 BUY 1-Aug-14 295 345 BUY

Rating Legend (Expected over a 12 month period)

Our Rating Upside

Buy More than 15%

Accumulate 5% - 15%

Hold 0 – 5%

Reduce -5% – 0

Sell Less than -5%

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