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 (`)
2
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
[email protected]
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
NA
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. (%)
3m
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
50
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
2
6
16
17
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 (`)
15
10
9
21
Research Analyst
P/E (x)
23
34
39
17
P/ABV (x)
3
3
2
2
022 - 39357600 Ext: 6810
RoA (%)
1.3
0.8
0.6
1.3
[email protected]
RoE (%)
10
6
5
12
Source: Company, Angel Research; Note: CMP as of Oct 29, 2018
Please refer to important disclosures at the end of this report
1
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
38
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
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
13
13
9
20
17
(11)
(15)
26
28
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
28
27
27
27
27
26
25
25
Overseas branches
18
16
15
15
14
13
13
13
SME
5
5
5
4
5
5
5
5
Retail Total
49
52
53.3
53.6
54.2
56.7
57.5
57.3
Source: Company, Angel Research
Oct 30, 2018
2
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
82
54
Drilldown
2,943
7,957
359
1,135
614
11,776
303
828
Existing NPA2 & nonfund
2,040
40
195
220
146
655
1,192
132
Loans under RBI resolution
-
32
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
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
2,800
3,300
3,400
3,500
3,400
3,438
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
200
200
-
2,004
2,005
SDR
-
600
1,500
1,500
2,700
1,000
-
-
S4A
-
-
300
400
300
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
3
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
55
On Current M.Cap
39
General Insurance
56
On Current M.Cap
31
Mutual Fund
51
8% of current AUM
10
Other (Home Fin, VC, Securities PD and
33
Overseas subsidiaries)
Total subsidiaries' value @ 20% discount
88
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
4
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 (%)
11
2
6
16
17
Other Income
15,323
19,503
17,419
14,336
16,260
- YoY Growth (%)
26
27
(11)
(18)
13
Operating Income
36,547
41,241
40,444
41,133
47,599
- YoY Growth (%)
17
13
(2)
2
16
Operating Expenses
12,684
14,754
15,704
17,372
19,908
- YoY Growth (%)
10
16
6
11
15
Pre - Provision Profit
23,863
26,487
24,741
23,761
27,691
- YoY Growth (%)
21
11
(7)
(4)
17
Prov. & Cont.
11,668
15,207
17,307
16,166
10,006
- YoY Growth (%)
199
30
14
(7)
(38)
Profit Before Tax
12,196
11,279
7,434
7,594
17,685
- YoY Growth (%)
(23)
(8)
(34)
2
133
Prov. for Taxation
2,469
1,478
789
1,799
4,421
- as a % of PBT
20
13
11
24
25
PAT
9,726
9,802
6,645
5,795
13,264
- YoY Growth (%)
(13)
1
(32)
(12.8)
129
Balance Sheet
Y/E March (` cr)
FY16
FY17
FY18
FY19E
FY20E
Equity
1,170
1,171
1,292
1,284
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 (%)
17
16
14
9
15
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 (%)
12
7
10
14
15
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
5
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
35
36
39
42
42
RoA
1.4
1.3
0.8
0.6
1.3
RoE
11
10
6
5
12
B/S ratios (%)
CASA Ratio
46
50
52
51
51
Credit/Deposit Ratio
1.03
0.95
0.91
0.95
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
50
60
60
60
60
Per Share Data (`)
EPS
15
15
10
9
21
ABVPS (70% cover.)
112
116
125
143
160
DPS
5
2
2
2
4
Valuation Ratios
PER (x)
23
23
34
39
17
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
1.6
Op. Inc.
3.6
3.5
2.8
2.7
3.7
Opex
1.9
2.0
1.9
1.9
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
6
ICICI Bank | 2QFY2019 Result Update
Research Team Tel: 022 - 39357800
E-mail: [email protected]
Website: www.angelbroking.com
DISCLAIMER
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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.
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Disclosure of Interest Statement
ICICI Bank
1. Financial interest of research analyst or Angel or his Associate or his relative
No
2. Ownership of 1% or more of the stock by research analyst or Angel or associates or relatives
No
3. Served as an officer, director or employee of the company covered under Research
No
4. Broking relationship with company covered under Research
No
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
7