2QFY2019 Result Update | Banking

Oct 30, 2018

ICICI Bank

BUY

CMP

`349

Performance Highlights

Target Price

`410

Particulars (` cr)

2QFY19

1QFY19

% chg (qoq) 2QFY19

% chg (yoy)

Investment Period

12 Months

NII

6,418

6,102

5.2

5,709

12.4

Pre-prov. profit

5,250

5,808

(9.6)

6,986

(24.9)

Stock Info

PAT

909

(120)

2,058

Sector

Banking

Source: Company, Angel Research

Market Cap (` cr)

2,22,967

ICICI Bank reported net profit of `909cr in 2QFY2019, driven by strong growth in

Beta

1.5

pre-provision profit (PPP). PPA was helped by strong uptick in margins (+14bps

52 Week High / Low

365.7/256

qoq) to 3.3%. Moreover, credit cost continued to moderate for ICICI (3.01% in

Avg. Daily Volume

16,41,250

2QFY2019), with total provisions down 33% qoq to `3,994cr. Slippages were

Face Value (`)

multi quarter low at

`3,117cr, of which

`1,304cr was owing to currency

BSE Sensex

34,066

depreciation.

Nifty

10,251

Reuters Code

ICBK.NS

Healthy growth in retail advances; slippages at low

Bloomberg Code

ICICIBC@IN

During 2QFY2019, the bank’s advances grew by 12.8% yoy (5.5% qoq), aided by

healthy retail loan book growth of 20.5% yoy. The main drivers leading to the

growth in the retail loan book were personal loans/credit card, which grew by

Shareholding Pattern (%)

51%/25.6% yoy respectively. Retail contribution to total loans increased to 57.3%

Promoters

as compared to 53.6% in the corresponding quarter of the previous year. The

corporate loan book grew 5.5% yoy, declined 5.3% qoq.

MF / Banks / Indian Fls

44.2

Deposits growth was modest at 12% yoy, while CASA deposits saw a growth of

FII / NRIs / OCBs

45.3

15% yoy, resulting in improvement in CASA ratio by 124bps yoy to 50.8%. Net

Indian Public / Others

10.5

interest margin (NIM) improved sequentially 14bps to 3.33%, as cost of funds

remained flat at 5% vs. 4.99% qoq, while the yield on funds improved 16bps

sequentially to 7.85%.

Abs. (%)

1yr

3yr

On the asset quality front, the bank witnessed slippages during the quarter to the

Sensex

(9.2)

2.4

25.1

tune of `3,117cr, which were at multi quarter lows and largely driven by the

portfolio rated BB & below and

`1,304cr from the currency depreciation on

ICICI Bank

16.7

16.2

25.4

existing foreign currency NPAs. The Gross NPA ratio declined 27bps sequentially

to 8.54%, whereas the Net NPA declined 54bps qoq to 3.65% in 2QFY2019.

3-year price chart

400

Outlook & Valuation: At the current market price, the bank’s core banking

350

business (after adjusting the value of subsidiaries) is trading at 1.6x FY20E ABV.

300

We believe strength of liability franchise (CASA-51%), shift in loan mix towards

250

retail assets and better rated companies, strong capitalization (tier I of 15.38%),

200

150

steady improvement in stress loan and going forward quick resolution under IBC

100

would be the key triggers for multiple expansion. We recommend a Buy on the

stock, with a target price of `410.

Key financials (Standalone)

Y/E March (` cr)

FY2017

FY2018

FY2019E

FY2020E

NII

21,738

23,025

26,797

31,339

Source: Company, Angel Research

% chg

Net profit

9,802

6,645

5,795

13,264

% chg

0.8

(32.2)

(12.8)

129

NIM (%)

3.2

3.1

3.2

3.3

Jaikishan Parmar

EPS (`)

Research Analyst

P/E (x)

P/ABV (x)

022 - 39357600 Ext: 6810

RoA (%)

1.3

0.8

0.6

1.3

[email protected]

RoE (%)

Source: Company, Angel Research; Note: CMP as of Oct 29, 2018

Please refer to important disclosures at the end of this report

ICICI Bank | 2QFY2019 Result Update

Exhibit 1: quarterly results summary

Particulars (` cr)

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

Q3FY18

Q4FY18

Q1FY19

Q2FY19

% qoq

% yoy

Interest Earned

13,639

13,618

13,569

13,459

13,577

13,665

14,264

14,722

15,106

2.6

11.3

on Advances

9,905

9,870

9,991

9,847

10,090

10,238

10,690

10,982

11,512

4.8

14.1

on investments

2,997

2,948

2,622

2,827

2,879

2,860

3,001

3,136

3,086

(1.6)

7.2

on bal with RBI

126

282

199

145

154

166

227

147

(34.9)

1.8

on others

699

675

674

586

463

412

406

378

360

(4.8)

(22.2)

Interest Expended

8,386

8,254

7,606

7,869

7,868

7,960

8,243

8,620

8,688

0.8

10.4

NII

5,253

5,364

5,962

5,590

5,709

5,705

6,022

6,102

6,418

5.2

12.4

Other Income

9,119

3,938

3,017

3,388

5,186

3,167

5,678

3,851

3,156

(18.0)

(39.1)

Oper income

14,372

9,302

8,979

8,978

10,895

8,872

11,700

9,953

9,574

(3.8)

(12.1)

Oper Exp

3,736

3,778

3,867

3,794

3,909

3,814

4,186

4,145

4,324

4.3

10.6

Emp expenses

1,556

1,406

1,480

1,511

1,514

1,363

1,526

1,514

1,661

9.7

Other Opex

2,180

2,372

2,387

2,283

2,395

2,452

2,660

2,631

2,663

1.2

11.2

Pre Prov Profit

10,636

5,524

5,112

5,184

6,986

5,057

7,513

5,808

5,250

(9.6)

(24.9)

Prov & Cont

7,082

2,713

2,898

2,609

4,503

3,570

6,626

5,971

3,994

(33.1)

(11.3)

PBT

3,554

2,812

2,214

2,575

2,483

1,488

888

(164)

1,255

(49.4)

Taxes

451

369

189

526

425

(162)

(132)

(43)

347

(18.5)

Tax rate

(11)

(15)

PAT

3,103

2,442

2,025

2,050

2,058

1,650

1,019

(120)

909

(55.8)

Source: Company, Angel Research

Exhibit 2: Strong Retail lending supports Loan Growth

Particulars (` cr)

3QFY17

4QFY17

1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

2QFY19

% QoQ

% YoY

Domestic Corporate

1,29,921

1,26,735

1,24,372

1,31,316

1,35,949

132198

131137

138329

5.5

5.3

Overseas branches

82,802

74,741

71,468

71,934

70,754

64562

64536

69051

7.0

(4.0)

SME

21,044

22,283

20,883

20,760

24,764

25620

23749

25294

6.5

21.8

Retail Total

2,23,703

2,40,472

2,47,352

2,58,770

2,73,920

291040

296866

311813

5.0

20.5

Total

4,57,469

4,64,232

4,64,075

4,82,780

5,05,387

513420

516289

544487

5.5

12.8

Loan Mix (%)

Domestic Corporate

Overseas branches

SME

Retail Total

53.3

53.6

54.2

56.7

57.5

57.3

Source: Company, Angel Research

Oct 30, 2018

ICICI Bank | 2QFY2019 Result Update

Exhibit 3: Slippages at multi quarter lows

Particulars (` cr)

Q2FY17

Q3FY17

Q4FY17

Q1FY18

Q2FY18

Q3FY18

Q4FY18

Q1FY19

Q2FY19

Opening gross NPA

27,563

32,548

38,085

42,552

43,148

44,489

46,039

54,063

53,465

Add: gross additions

8,089

7,037

11,289

4,976

4,674

4,380

15,737

4,036

3,117

slippages

1.78%

1.54%

2.43%

1.07%

0.97%

0.87%

3.07%

0.78%

0.57%

Slippages Annulised

3.87%

3.47%

12.29%

3.13%

2.29%

- of which: slippages from

Restructured assets

239

1,803

1,476

372

197

327

Drilldown

2,943

7,957

359

1,135

614

11,776

303

828

Existing NPA2 & nonfund

2,040

195

220

146

655

1,192

132

Loans under RBI resolution

111

192

2,022

877

246

Less: recoveries & upgrades

800

625

1,413

2,775

1,029

1,108

4,234

2,036

1,006

% of Adv recoveries & upgrades

0.18%

0.14%

0.30%

0.60%

0.21%

0.22%

0.83%

0.39%

0.18%

Net additions

7,229

6,412

9,876

2,201

3,645

3,272

11,503

2,000

2,111

Less: write-offs & sale

2,244

875

5,409

1,605

2,304

1,722

3,479

2,598

1,087

% of Adv recoveries & upgrades

0.49%

0.19%

1.17%

0.35%

0.48%

0.34%

0.68%

0.50%

0.20%

Closing gross NPAs

32,548

38,085

42,552

43,148

44,489

46,039

54,063

53,465

54,489

GNPA

6.1%

7.20%

7.89%

8.0%

7.87%

7.82%

8.84%

8.81%

8.54%

Less - Provision

16,065

17,930

17,101

17,842

20,359

22,229

26,177

29,295

32,403

Net NPAs

16,483

20,155

25,451

25,306

24,130

23,810

27,886

24,170

22,086

Net NPA ratio

3.21%

3.96%

4.89%

4.86%

4.43%

4.20%

4.77%

4.19%

3.65

PCR

49.36%

47.08%

40.19%

41.35%

45.76%

48.28%

48.42%

54.79%

59.47%

Source: Company, Angel Research

Exhibit 4: Declining trend in stress loans

Particulars (` cr)

2QFY17

3QFY17

4QFY17

1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

2QFY19

Outstanding stock of bad loans

44,300

38,200

30,100

28,300

25,800

13,461

11,898

10,720

(% of loans)

9.8%

8.4%

6.5%

6.1%

5.9%

5.1%

2.6%

2.3%

2.0%

NPA

Sub investment grade

32,500

27,500

19,000

20,400

19,600

19,100

4,728

4,401

3,283

Security receipts

2,800

3,300

3,400

3,500

3,400

3,438

3,436

Other dispensation

9,000

7,900

7,800

4,500

5,200

3,300

5,295

4,059

4,001

Restructured loans

6,300

6,400

4,300

2,400

2,000

1,800

1,595

1,445

1,443

...5.25

2,700

900

1,700

200

2,004

2,005

SDR

600

1,500

2,700

1,000

S4A

300

400

300

2,200

610

553

Other

1,500

(% of loans) RS

1.39

1.40

0.93

0.52

0.42

0.36

0.31

0.28

0.27

Source: Company

Oct 30, 2018

ICICI Bank | 2QFY2019 Result Update

Exhibit 5: SOTP valuation summary

Valuation

Particulars

Value/share (`)

Methodology

Value of ICICI standalone

100

2x FY20E ABV

319

Subsidiaries

ICICI Prudential Life

On Current M.Cap

General Insurance

On Current M.Cap

Mutual Fund

8% of current AUM

Other (Home Fin, VC, Securities PD and

Overseas subsidiaries)

Total subsidiaries' value @ 20% discount

Fair value per share

410

Source: Company, Angel Research

Outlook & Valuation: At the current market price, the bank’s core banking

business (after adjusting the value of subsidiaries) is trading at 1.6x FY20E

ABV. We believe strength of liability franchise (CASA-51%), shift in loan mix

towards retail assets and better rated companies, strong capitalization (tier I of

15.38%), steady improvement in stress loan and going forward quick

resolution under IBC would be the key triggers for multiple expansion. We

recommend a Buy on the stock, with a target price of `410.

Oct 30, 2018

ICICI Bank | 2QFY2019 Result Update

Income Statement

Y/E March (` cr)

FY16

FY17

FY18

FY19E

FY20E

Net Interest Income

21,224

21,738

23,025

26,797

31,339

- YoY Growth (%)

Other Income

15,323

19,503

17,419

14,336

16,260

- YoY Growth (%)

(11)

(18)

Operating Income

36,547

41,241

40,444

41,133

47,599

- YoY Growth (%)

(2)

Operating Expenses

12,684

14,754

15,704

17,372

19,908

- YoY Growth (%)

Pre - Provision Profit

23,863

26,487

24,741

23,761

27,691

- YoY Growth (%)

(7)

(4)

Prov. & Cont.

11,668

15,207

17,307

16,166

10,006

- YoY Growth (%)

199

(7)

(38)

Profit Before Tax

12,196

11,279

7,434

7,594

17,685

- YoY Growth (%)

(23)

(8)

(34)

133

Prov. for Taxation

2,469

1,478

789

1,799

4,421

- as a % of PBT

PAT

9,726

9,802

6,645

5,795

13,264

- YoY Growth (%)

(13)

(32)

(12.8)

129

Balance Sheet

Y/E March (` cr)

FY16

FY17

FY18

FY19E

FY20E

Equity

1,170

1,171

1,292

1,284

Reserve & Surplus

88,566

98,780

1,03,868

1,08,086

1,18,697

Net worth

89,736

99,951

1,05,160

1,09,370

1,19,981

Deposits

4,21,426

4,90,039

5,60,975

6,12,971

7,03,399

- Growth (%)

Borrowings

1,74,807

1,47,556

1,82,859

1,97,150

2,24,926

Other Liab. & Prov.

34,726

34,245

30,195

36,952

52,087

Total Liabilities

7,20,695

7,71,791

8,79,189

9,56,444

11,00,393

Cash Balances

27,106

31,702

33,102

38,208

44,256

Bank Balances

32,763

44,011

51,067

27,462

31,809

Investments

1,60,412

1,61,507

2,02,994

2,22,376

2,56,405

Advances

4,35,264

4,64,232

5,12,395

5,83,268

6,69,313

- Growth (%)

Fixed Assets

7,577

7,805

7,904

9,313

10,787

Other Assets

57,574

62,535

71,727

75,818

87,821

Total Assets

7,20,695

7,71,791

8,79,189

9,56,444

11,00,393

Oct 30, 2018

ICICI Bank | 2QFY2019 Result Update

Exhibit 6: Key Ratio

Y/E March

FY16

FY17

FY18E

FY19E

FY20E

Profitability ratios (%)

NIMs

3.3

3.2

3.1

3.2

3.3

Cost to Income Ratio

RoA

1.4

1.3

0.8

0.6

1.3

RoE

B/S ratios (%)

CASA Ratio

Credit/Deposit Ratio

1.03

0.95

0.91

0.95

Asset Quality (%)

Gross NPAs

5.2

7.9

8.8

6.9

5.7

Net NPAs

2.7

4.9

3.5

2.8

2.3

Slippages

4.2

7.5

6.4

2.5

2.0

Loan Loss Prov. /Avg. Assets

1.71

2.04

2.10

1.76

0.97

Provision Coverage

Per Share Data (`)

EPS

ABVPS (70% cover.)

112

116

125

143

160

DPS

Valuation Ratios

PER (x)

P/ABVPS (x)

3.1

3.0

2.8

2.4

2.2

Dividend Yield (%)

1.3

0.7

0.6

0.5

1.2

DuPont Analysis

NII

3.1

2.9

2.8

2.9

3.0

(-) Prov. Exp.

1.7

2.0

2.1

1.8

1.0

Adj. NII

1.4

0.9

0.7

1.2

2.1

Other Inc.

2.2

2.6

2.1

1.6

Op. Inc.

3.6

3.5

2.8

2.7

3.7

Opex

1.9

2.0

1.9

PBT

1.8

1.5

0.9

0.8

1.7

Taxes

0.4

0.2

0.1

0.2

0.4

RoA

1.4

1.3

0.8

0.6

1.3

Leverage

8.0

7.9

8.0

8.6

9.0

RoE

11.4

10.3

6.5

5.4

11.6

Source: Valuation done on Closing price of 29/10/2018

Oct 30, 2018

ICICI Bank | 2QFY2019 Result Update

Research Team Tel: 022 - 39357800

E-mail: [email protected]

Website: www.angelbroking.com

DISCLAIMER

Angel Broking Limited (hereinafter referred to as “Angel”) is a registered Member of National Stock Exchange of India Limited, Bombay

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Analyst in terms of SEBI (Research Analyst) Regulations, 2014 vide registration number INH000000164. Angel or its associates has not

been debarred/ suspended by SEBI or any other regulatory authority for accessing /dealing in securities Market. Angel or its

associates/analyst has not received any compensation / managed or co-managed public offering of securities of the company covered

by Analyst during the past twelve months.

This document is solely for the personal information of the recipient, and must not be singularly used as the basis of any investment

decision. Nothing in this document should be construed as investment or financial advice. Each recipient of this document should

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contrary view, if any

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Disclosure of Interest Statement

ICICI Bank

1. Financial interest of research analyst or Angel or his Associate or his relative

2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives

3. Served as an officer, director or employee of the company covered under Research

4. Broking relationship with company covered under Research

Ratings (Based on expected returns

Buy (> 15%)

Accumulate (5% to 15%)

Neutral (-5 to 5%)

over 12 months investment period):

Reduce (-5% to -15%)

Sell (< -15)

Oct 30, 2018