ICICI Bank reported a decent set of number for 2QFY2016, with PAT growth of
11.9% yoy to Rs3,030cr (in-line with our expectation).
Healthy growth in retail advances
During 2QFY2016, the bank’s advances grew by 13.3% yoy (2.5% qoq), aided by
healthy retail loan book growth of 25.2% yoy. The main drivers leading to the
growth in the retail loan book were Personal loans and Home loans, which grew
by 56% and 25% yoy respectively. Retail contribution to total loans increased to
44.0% as compared to 39.8% in the corresponding quarter of the previous year.
The corporate book grew 7.2% yoy. Advances were made mainly towards working
capital requirements while some of the incremental lending was done to PSU
companies and other better rated companies.
Deposits growth was modest at 9.2% yoy, while CASA deposits saw a moderate
growth of 12.9% yoy, resulting in improvement in CASA ratio by 144bp yoy to
45.1%. The Reported NIM fell by 2bp qoq to 3.52%, with domestic NIM at 3.84%
as compared to 3.90% in 1QFY2016. The non-interest income (excluding treasury)
for the bank grew 7.1% yoy.
On the asset quality front, the bank witnessed slippages during the quarter to the
tune of Rs2,242cr (annualized slippage ratio at 2.3%) as compared to Rs1,672cr in
the sequential previous quarter (annualized slippage ratio at 1.73%), with slippage
from restructuring at Rs931cr. The Gross NPA ratio increased 9bp sequentially to
3.77%, whereas the Net NPA rose 7bp qoq to1.65%. The bank refinanced
~Rs2,000cr under the 5:25 scheme. The Management has guided for lower
addition to NPA and restructuring in FY2016 as against FY2015.
Outlook and valuation: At the current market price, the bank’s core banking
business (after adjusting Rs58/share towards value of subsidiaries) is trading at 1.5x
FY2017E ABV. The valuation discount in our view vis-à-vis other private banks
adequately factors in the relatively higher stressed assets in the bank’s books. We
recommend a Buy rating on the stock, with a target price of Rs348.
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