1QFY2019 Result Update | Banking

July 30, 2018

ICICI Bank

BUY

CMP

`307

Performance Highlights

Target Price

`411

Particulars (` cr)

3QFY18

2QFY18

% chg (qoq) 3QFY17

% chg (yoy)

Investment Period

12 Months

NII

6,102

6,022

1.3

5,590

9.2

Pre-prov. profit

5,808

7,513

(22.7)

5,184

12.0

Stock Info

PAT

(120)

1,019

2,050

Sector

Banking

Source: Company, Angel Research

Market Cap (` cr)

1,97,635

ICICI Bank reported loss of `120cr owing to MTM losses (after IPru Life stake sale)

Beta

1.6

and elevated provisions (increased coverage on NCLT exposure). Net interest

52 Week High / Low

365.7/256

income grew by 9.2% and reported NIM compressed by 5bps/8bps qoq/yoy to

Avg. Daily Volume

13,74,077

3.19%. Slippage for Q1FY19 was `4,036cr, which is lowest from last 11 quarter.

Face Value (`)

Healthy growth in retail advances; slippages at low

BSE Sensex

37,494

Nifty

11,319

During 1QFY19, the bank’s advances grew by 11.3% yoy (0.6% qoq), aided by

Reuters Code

ICBK.NS

healthy retail loan book growth of 20% yoy. The main drivers leading to the

Bloomberg Code

ICICIBC@IN

growth in the retail loan book were Personal loans/credit card/business banking

loan, which grew by 47.7%/27.9%/40.7 yoy respectively. Retail contribution to

total loans increased to 57.5% as compared to 53.3% in the corresponding

Shareholding Pattern (%)

quarter of the previous year. The corporate loan book grew 5.4% yoy, declined

0.8% qoq.

Promoters

Deposits growth was modest at 12.5% yoy, while CASA deposits saw a growth of

MF / Banks / Indian Fls

31.7

16.1% yoy, resulting in improvement in CASA ratio by 157bps yoy to 50.5%. The

FII / NRIs / OCBs

60.4

reported NIM fell by 5bps/8bps qoq/yoy to 3.19%, with domestic NIM at 3.54% as

Indian Public / Others

7.7

compared to 3.67% in 4QFY18.

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

tune of `4,036cr, which were at multi quarter lows and largely driven by drill down

Abs. (%)

3m 1yr

3yr

list and existing addition to NPA (exchange fluctuation). The Gross NPA ratio

Sensex

6.2

14.8

35.5

declined 3bps sequentially to 8.81%, whereas the Net NPA declined 58bps qoq to

ICICI Bank

3.1

(2.9)

10.8

4.2% in Q1FY19. The bank has sequentially enhanced provision in NCLT-1 from

52.6% to 87.9% and in NCLT-2 from 47.8% to 6.7%. Total exposure (funded and

Non- funded) stand at `14,300cr.

3-year price chart

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

400

350

business (after adjusting value of subsidiaries) is trading at 1.16x FY20E ABV. We

300

believe strength of liability franchise (CASA-50%), shift in loan mix towards retail

250

assets and better rated companies, Strong capitalization (tier I of 14.42%), and

200

150

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

100

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

the stock, with a target price of `411.

Key financials (Standalone)

Source: Company, Angel Research

Y/E March (` cr)

FY2017

FY2018

FY2019E

FY2012E

NII

21,738

23,025

26,781

30,126

% chg

Net profit

9,802

6,645

6,807

12,339

% chg

0.8

(32.2)

2.4

NIM (%)

3.2

3.1

3.2

3.3

EPS (`)

P/E (x)

Jaikishan Parmar

P/ABV (x)

Research Analyst

RoA (%)

1.3

0.8

0.7

1.2

022 - 39357600 Ext: 6810

RoE (%)

[email protected]

Source: Company, Angel Research; Note: CMP as of July 30, 2018

Please refer to important disclosures at the end of this report

ICICI Bank | 1QFY2019 Result Update

Exhibit 1: quarterly results summary

Particulars (` cr)

2QFY17

3QFY17

4QFY17

1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

% YoY

% QoQ

Interest earned

13,639

13,618

13,569

13,459

13,577

13,665

14,264

14,722

9.4

3.2

- on Advances / Bills

9,905

9,870

9,991

9,847

10,090

10,238

10,690

10,982

11.5

2.7

- on investments

2,997

2,948

2,622

2,827

2,879

2,860

3,001

3,136

10.9

4.5

- on balance with RBI & others

126

282

199

145

154

166

227

14.1

36.5

- on others

699

675

674

586

463

412

406

378

(35.5)

(7.0)

Interest Expended

8,386

8,254

7,606

7,869

7,868

7,960

8,243

8,620

9.5

4.6

Net Interest Income

5,253

5,364

5,962

5,590

5,709

5,705

6,022

6,102

9.2

1.3

Other income

9,119

3,938

3,017

3,388

5,186

3,167

5,678

3,851

13.7

(32.2)

- Fee income

2,356

2,495

2,446

2,377

2,570

2,639

2,755

2,754

15.9

(0.0)

- Treasury income

6412

893

503

858

2193

2685

766

(10.7)

(71.5)

- Others

351

550

153

423

462

238

331

116.3

39.1

Operating income

14,372

9,302

8,979

8,978

10,895

8,872

11,700

9,953

10.9

(14.9)

Operating expenses

3,736

3,778

3,867

3,794

3,909

3,814

4,186

4,145

9.3

(1.0)

- Employee expenses

1,556

1,406

1,480

1,511

1,514

1,363

1,526

1,514

0.2

(0.8)

- Other Opex

2,180

2,372

2,387

2,283

2,395

2,452

2,660

2,631

15.3

(1.1)

Pre-provision Profit

10,636

5,524

5,112

5,184

6,986

5,057

7,513

5,808

12.0

(22.7)

Provisions & Contingencies

7082

2713

2898

2609

4503

3570

6626

5971

128.9

(9.9)

PBT

3,554

2,812

2,214

2,575

2,483

1,488

888

(164)

Provision for Tax

451

369

189

526

425

(162.1)

(131.8)

(43.4)

PAT

3,103

2,442

2,025

2,050

2,058

1,650

1,019

(120)

Source: Company, Angel Research

Exhibit 2: Strong Retail lending supports Loan Growth

Particulars (` cr)

3QFY17

4QFY17

1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

% YoY

% QoQ

Domestic Corporate

1,29,921

1,26,735

1,24,372

1,31,316

1,35,949

132198

131137

5.4

(0.8)

Overseas branches

82,802

74,741

71,468

71,934

70,754

64562

64536

(9.7)

(0.0)

SME

21,044

22,283

20,883

20,760

24,764

25620

23749

13.7

(7.3)

Retail Total

2,23,703

2,40,472

2,47,352

2,58,770

2,73,920

291040

296866

20.0

2.0

Total

4,57,469

4,64,232

4,64,075

4,82,780

5,05,387

513420

516289

11.3

0.6

Loan Mix (%)

Domestic Corporate

Overseas branches

SME

Retail Total

53.3

53.6

54.2

56.7

57.5

Source: Company, Angel Research

July 30, 2018

ICICI Bank | 1QFY2019 Result Update

Exhibit 3: Slippages at multi quarter lows

Particulars (` cr)

Q3FY17

Q4FY17

Q1FY18

Q2FY18

Q3FY18

Q4FY18

Q1FY19

Opening gross NPA

32,548

38,085

42,552

43,148

44,489

46,039

54,063

Add: gross additions

7,037

11,289

4,976

4,674

4,380

15,737

4,036

slippages

1.54%

2.43%

1.07%

0.97%

0.87%

3.07%

0.78%

Slippages Annulised

3.87%

3.47%

12.29%

3.13%

- 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

Existing NPA2 & non-fund

2,040

195

220

146

655

1,192

Loans under RBI resolution

111

192

2,022

877

246

Less: recoveries & upgrades

625

1,413

2,775

1,029

1,108

4,234

2,036

% of Adv recoveries & upgrades

0.14%

0.30%

0.60%

0.21%

0.22%

0.83%

0.39%

Net additions

6,412

9,876

2,201

3,645

3,272

11,503

2,000

Less: write-offs & sale

875

5,409

1,605

2,304

1,722

3,479

2,598

% of Adv recoveries & upgrades

0.19%

1.17%

0.35%

0.48%

0.34%

0.68%

0.50%

Closing gross NPAs

38,085

42,552

43,148

44,489

46,039

54,063

53,465

GNPA (%)

7.20%

7.89%

8.0%

7.87%

7.82%

8.84%

8.81%

Less - Provision

17,930

17,101

17,842

20,359

22,229

26,177

29,295

Net NPAs

20,155

25,451

25,306

24,130

23,810

27,886

24,170

Net NPA (%)

3.96%

4.89%

4.86%

4.43%

4.20%

4.77%

4.19%

PCR (Calc)

47.08%

40.19%

41.35%

45.76%

48.28%

48.42%

54.79%

Source: Company, Angel Research

Exhibit 4: Declining trend in stress loans

Particulars (` cr)

4QFY16 1QFY17 2QFY17 3QFY17 4QFY17 1QFY18

2QFY18

3QFY18

4QFY18

1QFY19

Outstanding stock of bad loans

53,300

48,100

44,300

38,200

30,100

28,300

25,800

13,461

11,898

(% of loans)

12.2%

10.7%

9.8%

8.4%

6.5%

6.1%

5.9%

5.1%

2.6%

2.3%

NPA

Sub investment grade

44,100

38,700

32,500

27,500

19,000

20,400

19,600

19,100

4,728

4,401

Security receipts

600

2,200

2,800

3,300

3,400

3,500

3,400

3,438

Other dispensation

8,600

7,200

9,000

7,900

7,800

4,500

5,200

3,300

5,295

4,059

Restructured loans

8,600

7,200

6,300

6,400

4,300

2,400

2,000

1,800

1,595

1,445

...5.25

2,700

900

1,700

200

2,004

SDR

600

1,500

2,700

1,000

S4A

300

400

300

2,200

610

Other

1,500

Source: Company, Angel Research

July 30, 2018

ICICI Bank | 1QFY2019 Result Update

Exhibit 5: SOTP valuation summary

Valuation

Particulars

Value/share (`)

Methodology

Value of ICICI standalone

100

1.9x FY20E ABV

306

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

105

Fair value per share

411

Source: Company, Angel Research

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

business (after adjusting value of subsidiaries) is trading at 1.16x FY20E ABV. We

believe strength of liability franchise (CASA-50%), shift in loan mix towards retail

assets and better rated companies, Strong capitalization (tier I of 14.42%), and

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

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

the stock, with a target price of `411.

July 30, 2018

ICICI Bank | 1QFY2019 Result Update

Income Statement

Y/E March (` cr)

FY16

FY17

FY18

FY19E

FY20E

Net Interest Income

21,224

21,738

23,025

26,781

30,126

- YoY Growth (%)

Other Income

15,323

19,503

17,419

14,458

15,957

- YoY Growth (%)

(11)

(17 )

Operating Income

36,547

41,241

40,444

41,239

46,083

- YoY Growth (%)

(2)

Operating Expenses

12,684

14,754

15,704

17,196

19,812

- YoY Growth (%)

Pre - Provision Profit

23,863

26,487

24,741

24,042

26,271

- YoY Growth (%)

(7)

-3

Prov. & Cont.

11,668

15,207

17,307

15,209

9,820

- YoY Growth (%)

199

(12)

(35)

Profit Before Tax

12,196

11,279

7,434

8,833

16,451

- YoY Growth (%)

(23)

(8)

(34)

Prov. for Taxation

2,469

1,478

789

2,026

4,113

- as a % of PBT

PAT

9,726

9,802

6,645

6,807

12,339

- YoY Growth (%)

(13)

(32)

2.4

Balance Sheet

Y/E March (` cr)

FY16

FY17

FY18

FY19E

FY20E

Equity

1,170

1,171

1,292

Reserve & Surplus

88,566

98,780

1,03,868

1,09,592

1,19,463

Net worth

89,736

99,951

1,05,160

1,10,883

1,20,754

Deposits

4,21,426

4,90,039

5,60,975

6,18,036

7,09,211

- Growth (%)

Borrowings

1,74,807

1,47,556

1,82,859

1,91,026

2,17,938

Other Liab. & Prov.

34,726

34,245

30,195

25,807

40,243

Total Liabilities

7,20,695

7,71,791

8,79,189

9,45,752 10,88,146

Cash Balances

27,106

31,702

33,102

38,523

44,622

Bank Balances

32,763

44,011

51,067

27,689

32,072

Investments

1,60,412

1,61,507

2,02,994

2,21,287

2,55,165

Advances

4,35,264

4,64,232

5,12,395

5,72,419

6,56,863

- Growth (%)

Fixed Assets

7,577

7,805

7,904

9,390

10,877

Other Assets

57,574

62,535

71,727

76,445

88,547

Total Assets

7,20,695

7,71,791

8,79,189

9,45,752 10,88,146

July 30, 2018

ICICI Bank | 1QFY2019 Result Update

Key Ratio

Y/E March

FY16

FY17

FY18

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

0.7

1.2

RoE

B/S ratios (%)

CASA Ratio

Credit/Deposit Ratio

1.03

0.95

0.91

0.93

Asset Quality (%)

Gross NPAs

5.2

7.9

8.8

7.0

5.8

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

1.67

0.97

Provision Coverage

Per Share Data (`)

EPS

ABVPS (75% cover.)

112

116

125

145

161

DPS

Valuation Ratios

PER (x)

P/ABVPS (x)

2.7

2.6

2.5

2.1

1.9

Dividend Yield (%)

1.5

0.7

1.2

DuPont Analysis

Int Income

7.7

7.3

6.7

6.8

7.0

Int Exp

4.6

4.3

3.9

4.1

NII

3.1

2.9

2.8

2.9

3.0

(-) Prov. Exp.

1.7

2.0

2.1

1.7

1.0

Adj. NII

1.4

0.9

0.7

1.3

2.0

Other Inc.

2.2

2.6

2.1

1.6

Op. Inc.

3.6

3.5

2.8

2.9

3.6

Opex

1.9

2.0

1.9

PBT

1.8

1.5

0.9

1.0

1.6

Taxes

0.4

0.2

0.1

0.2

0.4

RoA

1.4

1.3

0.8

0.7

1.2

Leverage

8.0

7.9

8.0

8.4

8.8

RoE

11.4

10.3

6.5

6.3

10.7

Source: Company

July 30, 2018

ICICI Bank | 1QFY2019 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

Stock Exchange Limited and Metropolitan Stock Exchange Limited. It is also registered as a Depository Participant with CDSL and

Portfolio Manager and Investment Adviser with SEBI. It also has registration with AMFI as a Mutual Fund Distributor. Angel Broking

Limited is a registered entity with SEBI for Research 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

make such investigations as they deem necessary to arrive at an independent evaluation of an investment in the securities of the

companies referred to in this document (including the merits and risks involved), and should consult their own advisors to determine

the merits and risks of such an investment.

Reports based on technical and derivative analysis center on studying charts of a stock's price movement, outstanding positions and

trading volume, as opposed to focusing on a company's fundamentals and, as such, may not match with a report on a company's

fundamentals. Investors are advised to refer the Fundamental and Technical Research Reports available on our website to evaluate the

contrary view, if any

The information in this document has been printed on the basis of publicly available information, internal data and other reliable

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document is for general guidance only. Angel Broking Limited or any of its affiliates/ group companies shall not be in any way

responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report.

Angel Broking Limited has not independently verified all the information contained within this document. Accordingly, we cannot

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While Angel Broking Limited endeavors to update on a reasonable basis the information discussed in this material, there may be

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Neither Angel Broking Pvt. Limited, nor its directors, employees or affiliates shall be liable for any loss or damage that may arise from

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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)

July 30, 2018