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    ICICI Bank Ltd.

    RESULT UPDATE 8th May, 2018

  • 2Page

    ICICI Bank Ltd Negligible drilldown puts focus on recoveries and resolutions CMP

    INR 308 Target

    INR 393 Potential Upside

    29% Market Cap (INR Mn)

    1,860,516 Recommendation

    BUY Sector

    BFSI

    India Equity Institutional Research II Result Update – Q4FY18 II 8th May, 2018

    Shares outs (Mn) 6428

    EquityCap (INR Mn) 12858

    Mkt Cap (INR Mn) 1860516

    52 Wk H/L (INR) 365/256

    Volume Avg (3m K) 21227

    Face Value (INR) 2

    Bloomberg Code ICICIBC IN

    MARKET DATA

    SHARE PRICE PERFORMANCE

    SENSEX 35216

    NIFTY 10718

    MARKET INFO

    Particulars (INR Mn) FY15 FY16 FY17 FY18E FY19E FY20E

    Net Interest Income 1,90,396.1 2,12,240.4 2,17,373.2 2,30,258.4 2,67,288.8 3,06,694.3

    Pre-provision profits 1,97,199.1 2,38,635.3 2,64,867.5 2,47,415.3 2,84,680.9 3,31,212.8

    Net Profit 1,11,751.5 97,267.4 98,014.6 67,774.2 93,634.0 1,40,968.2

    EPS (INR) 19.3 16.7 16.8 10.5 14.6 21.9

    BVPS (INR) 138.7 154.3 171.6 163.6 176.0 194.6

    ABVPS (INR) 127.9 132.0 128.3 120.2 138.4 162.0

    KEY FINANCIALS

    Source: Company, KRChoksey Research

    Result highlights

    Advances grew to INR 5123 bn, +10.4% yoy/1.4% qoq, primarily driven by retail exposure which grew 20.6% yoy/5.9% qoq. NII came at INR 60.2 bn, up 1% yoy/5.5% qoq. NIMs at 3.1% held stable qoq. The bank saw large one-off other income on account of stake sale in ICICI Securities (INR 33.2 bn) which were prudently used towards shoring up the PCR. Provisioning at INR 66.3 bn is up 1.3x yoy/86% qoq, translating into credit costs of >5% vs. 3% last quarter. Going forward, as the stress subsides, the bank has guided for normalized credit costs in the range of 80-100 bps. The bank reported a PAT of INR 10.2 bn (-50% yoy), largely weighed down by heavy provisioning expense.

    Slippages were INR 157.4 bn, of which 63% were on account of Feb 2018 RBI guidelines. Subsequently, the drill down list now stands reduced to INR 47.3 bn as against 440.7 bn as of March’16. While FY19 is expected to see elevated asset quality pressure, it is likely to revert back to normalcy FY20 onwards. The bank has guided for NNPA of 1.5% by June’20.

    Particulars Mar 18 Dec 17 Sep 17

    Promoters 0 0 0

    FIIs 36.46 35.91 34.5

    DIIs 31.52 31.76 31.81

    Others 32.03 32.34 33.68

    Total 100 100 100

    SHARE HOLDING PATTERN (%)

    Slippages render drilldown list meaningless from hereon

    Of the total slippages worth INR 157.4 bn, INR 99.7 bn (63%) were on account of new RBI guidelines (Feb 2018). Majority of the slippages during the quarter were from the guided drilldown list which now stands reduced to INR 47.3 bn as against 440.7 bn as of Q4FY16, forming

  • 3PageIndia Equity Institutional Research II Result Update – Q4FY18 II 8th May, 2018

    Valuation: With the massive reduction in the drilldown list, the focus should now shift towards effecting recoveries from the NPA pool. Though quantum of unrecognised stress at INR 133.7 bn forms about 2.6% of the loans which will continue to be monitored. Increasing share of retail, shrinking the non-lucrative international book and resolution of NPAs should aid in NIMs recovery and subsiding of stress assets should translate into lower credit costs. We value the consolidated entity on SOTP basis, valuing the bank at 1.8x FY20E ABV and adding INR 113 per share for the subs. We recommend BUY.

    ICICI Bank Ltd

    ICICI Bank Ltd. - SOTP VALUATION SUMMARY

    Entity Valuation methodology Holding Intrinsic value

    per share (INR)

    FY20E

    ICICI Bank - Standalone banking business / Parent 1.8x FY20E ABV 100.0% 281

    ICICI Prudential Life Insurance 3x FY20E EV 54.9% 63

    ICICI Lombard General Insurance Current MCAP 55.9% 29

    ICICI Prudential AMC 5% of FY20E AUM 51.0% 13

    ICICI Securities 15x FY20E P/E 80.0% 10

    ICICI Home Finance 2x FY20E BV 100.0% 6

    ICICI Bank UK Plc 1x FY18 BV 100.0% 5

    ICICI Bank Canada 1x FY18 BV 100.0% 4

    Others 2

    Holding co. discount (%) 15%

    Value of subs (INR per share) 113

    Value of total (INR per share) 393

    +91-22-6696 5555 / +91-22-6691 9576 www.krchoksey.com

    KRChoksey Research is also available on Bloomberg KRCS

    Thomson Reuters, Factset and Capital IQ

    ANALYST Raghav Garg, [email protected], +91-22-6696 5584 Anushka Chhajed, [email protected], +91-22-6696 5620

    Source: Company, KRChoksey Research

  • 4PageIndia Equity Institutional Research II Result Update – Q4FY18 II 8th May, 2018

    Q4FY18 con-call key highlights:

    The bank has been working on the strategic 4x4 agenda wherein

    – it has been able to build a granular deposit base

    – average CASA ratio has improved considerably

    – cost of deposits has come down to 70%

    – Offer best in class digital products

    – Automate internal processes

    Change the way it lends / new approach to corporate lending

    – Set up group exposure limits, substantially lower than regulatory limits

    – Focus on changing loan mix – increase share of retail to ?60% by March 2020.

    – Shrink the share of overseas book to

  • 5PageIndia Equity Institutional Research II Result Update – Q4FY18 II 8th May, 2018

    ICICI Bank Ltd

    Q4FY18: QUARTERLY RESULT ANALYSIS

    INR in mn Q4FY18 Q4FY17 Q3FY18 Y-o-Y Q-o-Q

    Income Statement

    Interest income 1,42,644 1,35,685 1,36,654 5.1% 4.4%

    Interest expense 82,427 76,064 79,601 8.4% 3.6%

    Net interest income 60,217 59,622 57,053 1.0% 5.5%

    Non interest income 56,786 30,172 31,669 88.2% 79.3%

    Total income 1,17,003 89,794 88,721 30.3% 31.9%

    Employee costs 15,262 14,805 13,626 3.1% 12.0%

    Other operating expenses 26,601 23,869 24,518 11.4% 8.5%

    Operating expenses 41,863 38,674 38,144 8.2% 9.8%

    Pre-provision profit 75,140 51,120 50,578 47.0% 48.6%

    Provisions 66,258 28,982 35,696 128.6% 85.6%

    Profit before tax 8,882 22,138 14,882 -59.9% -40.3%

    Tax expense -1,318 1,892 -1,621 -169.7% -18.7%

    Net profit 10,200 20,246 16,502 -49.6% -38.2%

    Balance sheet analysis Q4FY18 Q4FY17 Q3FY18 Y-o-Y Q-o-Q

    Deposits 56,09,752 49,00,391 51,74,031 14.5% 8.4%

    CASA deposits 28,99,250 24,68,210 26,06,350 17.5% 11.2%

    CASA (%) 51.7% 50.4% 50.4% 131 bps 131 bps

    Borrowings 18,28,586 14,75,562 15,81,761 23.9% 15.6%

    Investments 20,29,942 16,15,065 17,98,066 25.7% 12.9%

    Advances 51,23,953 46,42,321 50,53,869 10.4% 1.4%

    Total Assets 87,91,892 77,17,915 81,35,489 13.9% 8.1%

    Capital adequacy ratio (%) 18.42% 17.39% 17.65% 103 bps 77 bps

    Spread Analysis Q4FY18 Q4FY17 Q3FY18 Y-o-Y Q-o-Q

    Yield on avg advances (%) 8.3% 8.6% 8.1% -26 bps 24 bps

    Yield on avg interest earning assets (%) 7.1% 7.7% 7.4% -60 bps -24 bps

    Cost of funds (%) 4.4% 4.8% 4.7% -34 bps -28 bps

    NIM (%) 3.01% 3.4% 3.08% -39 bps -7 bps

    Asset quality Q4FY18 Q4FY17 Q3FY18 Y-o-Y Q-o-Q

    Gross NPA 5,40,625 4,25,515 4,60,387 27.1% 17.4%

    Net NPA 2,78,863 2,54,510 2,38,103 9.6% 17.1%

    GNPA (%) 8.84% 7.82% 7.89% 102 bps 95 bps

    NNPA (%) 4.77% 4.20% 4.89% 57 bps -12 bps

    PCR (%) 48% 40% 48% 823 bps 14 bps

    Credit costs (%) 3.7% 1.9% 2.1% 185 bps 162 bps

    Key ratios Q4FY18 Q4FY17 Q3FY18 Y-o-Y Q-o-Q

    Cost to income ratio (%) 35.8% 43.1% 43.0% -729 bps -721 bps

    C/D ratio (%) 91% 95% 98% -339 bps -634 bps

    RoA (%) 0.5% 1.0% 0.8% -59 bps -35 bps

    Leverage (x) 8.4 7.7 7.8

    RoE (%) 3.9% 8.1% 6.3% -422 bps -244 bps

    +91-22-6696 5555 / +91-22-6691 9576 www.krchoksey.com

    KRChoksey Research is also available on Bloomberg KRCS

    Thomson Reuters, Factset and Capital IQ

    ANALYST Raghav Garg, [email protected], +91-22-6696 5584 Anushka Chhajed, [email protected], +91-22-6696 5620

    Source: Company, KRChoksey Research

    Source: Company, KRChoksey Research

    Source: Company, KRChoksey Research

    Source: Company, KRChoksey Research

    Source: Company, KRChoksey Research

  • 6PageIndia Equity Institutional Research II Result Update – Q4FY18 II 8th May, 2018

    ICICI Bank Ltd

    Q4FY18: QUARTERLY RESULT ANALYSIS

    INR in mn Q4FY18 Q4FY17 Q3FY18 Y-o-Y Q-o-Q

    Income Statement

    Interest income 1,42,644 1,35,685 1,36,654 5.1% 4.4%

    Interest expense 82,427 76,064 79,601 8.4% 3.6%

    Net interest income 60,217 59,622 57,053 1.0% 5.5%

    Non interest income 56,786 30,172 31,669 88.2% 79.3%

    Total income 1,17,003 89,794 88,721 30.3% 31.9%

    Employee costs 15,262 14,805 13,626 3.1% 12.0%

    Other operating expenses 26,601 23,869 24,518 11.4% 8.5%

    Operating expenses 41,863 38,674 38,144 8.2% 9.8%

    Pre-provision profit 75,140 51,120 50,578 47.0% 48.6%

    Provisions 66,258 28,982 35,696 128.6% 85.6%

    Profit before tax 8,882 22,138 14,882 -59.9% -40.3%

    Tax expense -1,318 1,892 -1,621 -169.7% -18.7%

    Net profit 10,200 20,246 16,502 -49.6% -38.2%

    Balance sheet analysis Q4FY18 Q4FY17 Q3FY18 Y-o-Y Q-o-Q

    Deposits 56,09,752 49,00,391 51,74,031 14.5% 8.4%

    CASA deposits 28,99,250 24,68,210 26,06,350 17.5% 11.2%

    CASA (%) 51.7% 50.4% 50.4% 131 bps 131 bps

    Borrowings 18,28,586 14,75,562