ICICIBC held an analyst day to showcase its digital capabilities being placed at the core and leveraging the same across business segments & operations of the bank. Bank emphasized its journey of making “One Bank One ROE” as a principle for every business enabled through high focus on core operating profit. This will be led by high use of digital, technology & data analytics helping lower costs, maximize risk adjusted NIMs and enable customized offerings to increase stickiness. We have been witnessing some of the initiatives play out in past couple of quarters with improved market share in retail and re-oriented corporate lending towards granular lending. This has helped to come back on track towards the target ROEs of 15% by Jun FY21 (guidance unchanged) led by strong improvement in bank’s core operations. Hence, we maintain BUY with unchanged earnings and revise our TP to Rs605 (from Rs541) as we increase multiple to 2.5x from 2.1x based on Sep-21 ABV.
ICICIBC appears firmly positioned to deliver healthy sustainable growth, supported by continued investments in technology and expansion in its digital offerings. The bank has navigated well through a challenging macro environment with limited exposure to newly surfaced stressed names. It has in fact built one of the highest provisioning coverage in the banking sector. ICICIBC remains one of our top ideas in the BFSI space – we estimate RoA/RoE to improve to 1.6%/15.7% in FY21. Reiterate Buy with a revised SOTP-based TP of INR625 (2.5x Sep’21E ABV), primarily as we roll forward our valuations.
At the current market price, the bank’s core banking business (after adjusting the value of subsidiaries) is trading at 1.9x FY2021E ABV. We believe strength of liability franchise (CASA – 46.7%), shift in loan mix towards retail assets & better rated companies, strong capitalization (tier I of 14.62%), steady improvement in stressed loan and going forward quick resolution under IBC would be the key triggers for expansion. We recommend a Buy on the stock with a Target Price of Rs 532.
ICICI Bank (IBL) reported its 2QFY20 results with the key pointers being: (1) Slippages continued to decline further and were mostly in line with expectations (2) NIM improved to 3.64% (+3 bps QoQ) on the back of improving yields and cost of funds and (3) Employee expenses growth, adjusted for retirals, was 20% YoY on the back of increments and employees addition (See comprehensive conference call takeaways on page 2 for significant incremental colour). Per se, on the key P&L items, IBL posted NII growth of 26% YoY at Rs80,574mn, PPOP growth of 31% YoY at Rs68,741mn while the PAT declined 28%YoY to Rs6,550mn. We have revised our estimates for FY20/FY21/FY22 and retained Buy rating on IBL, revising our target price to Rs584 (from Rs563 earlier), valuing the stock at 1.8x H1FY22E standalone P/BV and ascribing a value of Rs 171 for subsidiaries.
ICICBC’s 2Q was ahead of our estimates. Reported asset quality was stable. The higher influx into the BB and below rated pool disappointed mildly. This was expected, given the spate of downgrades and peer commentary in 1Q. Maintain BUY with an SOTP of Rs 510 (2.0x Sept-21E core ABV of Rs 193 and sub-value of Rs 125).
We maintain Buy rating with a target price of Rs565, valuing the standalone bank at 1.8x 1HFY22E (or 1.9x FY21E) P/BV and ascribing a value of Rs 146 to the subsidiaries. ICICI is one of our top picks in the banking sector.
ICICIBC is better placed in a challenging macro environment (economic activity is slowing down and pace of stressed asset formation is posing an upside risk to asset quality), given that it has limited exposure to the newly surfaced stressed names and is well on track to see earnings normalization. However, continued weakness in the lending environment may pose a risk to revival in earnings trajectory. We expect the bank to deliver loan CAGR of 17% over FY19-21 and core RoA/RoE to improve to 1.5%/15.5%. Maintain Buy with an SOTP-based TP of INR520 (2.2x FY21E ABV for the bank). ICICI Bank remains our top pick in the sector.
Operating performance of the bank has been steady and is set to see earnings normalization. The bank is adequately capitalized for growth and provisioning and its RoE is likely to improve steadily. Contribution from subsidiaries, especially insurance and asset management, remains strong. We maintain a BUY on the stock with a target price of Rs 475 (on SOTP assigning 2x FY21E core ABV and sub. value of Rs 117).
As structural changes become more evident at the bank with retail loans at ~61% of book and improving corporate asset quality, ICICIBC’s financials are expected to improve and stabilise. Control on costs, decreasing share of overseas business, high PCR, adequate capitalization and a stable management team provide comfort.We maintain a BUY with a target price of Rs. 462
At the current market price, the bank’s core bankingbusiness (after adjusting the value of subsidiaries) is trading at 1.7x FY2021E ABV. We believe strength of liability franchise (CASA - 45%), shift in loan mix towards retail assets & better rated companies, strong capitalization (tier I of 14.6%), steady improvement in stressed loan and going forward quick resolution under IBC would be the key triggers for expansion. We recommend a Buy on the stock with a Target Price of 490.
Our Call Valuation – We believe that with earnings normalising, it is the start of a sustainable growth cycle for the bank. With asset quality concerns receding and outlook shifting on growth (without need for equity dilution) we see only a few impediments to a pick-up in earnings and return ratios normalisation from here. We value the standlone bank at ~2.2x FY21E BV and estimate subsidiaries value at Rs ~120 per share. We therefore maintain our Buy rating with a revised price target (PT) of Rs. 550.
We maintain that the change in strategy – granularity, de-risking, people involvement – will keep earnings quality steady, which would be progressively valued as markets recognise their sustainability. We maintain a high-conviction ‘BUY’ with an SoTP-based TP of INR585.
We expect ICICI Bank’s RoA/RoE to improve to 1.5%/14% by FY21 and earnings to catapult more than 5x over FY19-21. Our SOTP valuation suggests that stand-alone bank is still trading at an undemanding valuation of 11x P/E and 1.6x P/ABV on FY21 estimates. ICICI Bank remains our Top Pick amongst the corporate lenders.
We have revised our NII estimates by -2.2%/-2.6%, PPOP estimates by -4.0%/-0.4%, and PAT estimates by -2.0%/0.5% for FY20/FY21, respectively. We have retained Buy rating on IBL, revising our target price to Rs529 (from Rs 523 earlier) valuing the stock at 1.8x FY21E standalone P/BV and ascribing a value of Rs 146 for subsidiaries.
ICICIBC’s 1QFY20 show was mildly ahead of estimates. Our ‘healing’ thesis is mostly playing out (slippages and credit costs continue to moderate, coverage is now best- in class). Maintain BUY with an SOTP of Rs 492 (2.0x Jun- 21E core ABV of Rs 189 and sub-value of Rs 113).
ICICIBC has delivered steady operating performance and is set to see earnings normalization. With asset quality stabilizing, credit cost will moderate meaningfully in FY20E/21E, thus, boosting return ratios. For FY20/FY21, we have fine-tuned our estimates slightly and changed our tax assumption, thus, lowering PAT estimate by ~3%/4%. We expect the bank to deliver loan CAGR of 17% over FY19-21E, and estimate core RoA/RoE to improve to 1.5%/15.5%. Maintain Buy with a revised SOTP-based TP of INR520 (2.2x FY21E ABV for the bank). ICICI remains our top pick in the sector.
ICICIBC earnings of Rs19.1bn were much ahead of our estimate (PLe: Rs13.0bn) mainly on lower provisioning as slippages came in lower at Rs27.8bn (1.9% of loans) while PCR improved by 82bps QoQ to 71.5%. Core PPOP continues gain strength with growth of 21% YoY despite slower fee income and on stress side over BB & below is gradually moving down which is currently at 2.5% (from 3.0% in Q4). With pick-up in business with high yielding loan share & lost cost funding should help NIMs improvement, while normalizing credit cost should help strong recovery in earnings. We retain BUY with TP of Rs484 (from Rs475) based on 2.0x Mar-21 ABV & SOTP with risk-reward being favourable.
We believe, the change in tack—granularity, de-risking, people involvement—ensures steady quality earnings, which will be progressively valued up as the market gains confidence on sustainability. Consequently, we upfront the possible valuation expansion assigning 2.5x BV (2.0x earlier) leading to revised SOTP based TP of INR585 (earlier INR493) even though near-term earnings/RoEremain broadly intact. Maintain high conviction ‘BUY’ and as our top pick inthe sector.
With asset quality stabilising, we expect credit cost trajectory to moderate over FY20-21E. Also, key subsidiaries remain profitable and add meaningfully to SoTP. We maintain a BUY on the stock with a target price of Rs 478 (on SOTP assigning 2xcore ABV and sub. value of Rs 121).
At the current market price, the bank’s core bankingbusiness (after adjusting the value of subsidiaries) is trading at 1.6x FY2021E ABV. We believe strength of liability franchise (CASA - 50%), shift in loan mix towards retail assets & better rated companies, strong capitalization (tier I of 14.73%), steady improvement in stressed loan and going forward quick resolution under IBC would be the key triggers for expansion. We recommend a Buy on the stock with a Target Price of Rs 490.
While slippages for the qtr were higher vs. expected, the overall stress declined, keeping the bank’s prospects remain largely unchanged. Maintain (2.0x Mar-21 core ABV of Rs 172 and sub-value of Rs 109).
We believe that the Bank is approaching the end of recognition of stressed loan cycle, which along with improving PCR clearly indicates sharp moderation in credit cost, going forward. Further, the bank’s strong liability franchise with industry best CASA level and healthy capitalisation add to our comfort. Looking ahead, we expect the Bank to deliver sustained improvement across operating metrics led by dwindling headwinds on asset quality front and improving balance sheet. Trimming our earnings estimates to factor slightly higher provisions, we maintain our BUY recommendation on the stock with an SOTP-based Target Price of Rs460 (revised from Rs470 earlier) based on 1.9x FY21E adjusted PBV and the value of its subsidiaries, implying a FY21 P/ABV of 2.5x.
We expect ICICI Bank to deliver NII growth of average 9% YoY in FY20E/FY21E on back of its renewed focus on retail business (network of 4,874 branches and 14,987 ATMs). In fact, the bank has moderated its pace of retail franchisee build up (opened net 7 new branches vs. 17 in FY18) which should benefit the cost front, while improving branch metrics (led by strong retail loan growth) should drive C/I ratio lower (forecast to ~40% in FY20/21). Better pricing on retail products should support overall asset yields while rising mix of term deposits should keep CoF elevated at close to 5.0% levels. Overall, we expect NIMs to average 3.2% in FY20/21. Higher fee income should support the overall operating income growth (+13% average for FY20/21). Asset quality metrices are forecast to improve credit costs expected to be ~1.6% , PCR at 60-65% and Net NPA expected to remain ~2.0% in the forecast period. ICICI Bank is currently trading at a P/Adj.BV multiple of 2.1x/1.9x on FY20E/FY21E adj. book value and we expect the valuation discount for the bank to continue on back of weak ROE outlook (~10% for FY20/21). We apply a P/Adj.BV multiple of 1.8x to the FY21 adj. BVPS of INR 183 (as we believe the provisions will be more normalized in FY21) to arrive at a standalone valuation (~75% of group valuation). We use SOTP approach (adding for its subsidiaries/holdings) to arrive at a target price of INR 440 per share, an upside of 13.9% over the CMP. Accordingly, we assign an “Accumulate” rating.
ICICI Bank has been successful in improving its operational performance led by declining NPAs and a pickup in the loan growth. The bank has been driving the all-around performance in its core industry parameters. The provisioning has come down and consistent performance in its loan growth should drive the earnings momentum in the coming years. The focus remains on reducing the costs, improving asset quality and risk management capabilities. The fair value of ICICI Bank along with its subsidiaries comes to Rs. 493 per share and we strongly recommend to buy ICICI Bank.
ICICIBC earnings of Rs9.7bn were much below our estimates (PLe: Rs17.3bn) on back of relatively higher provisions to enhance PCR and higher write-offs. Core PPOP continues to be steady uptick with 26% YoY growth on back 26% NII growth (18-19% post adjustment of interest on IT refund). Slippages came in slightly higher at Rs35.0bn of which one large a/c from Sugar sector was turned into NPA on RBI classification, adjusting to which slippages remained in line with estimates. We continue to believe return ratios are on gradual uptick as credit cost normalize to lower levels, NIM improvement from loan mix and better liabilities profile and asset quality improvements with already high PCR of 70%. We retain our BUY rating and sector top pick with TP of Rs475 (from Rs427) based on 2.0x Mar-21 SOTP as we roll forward and improve our assumptions on credit cost and NIMs.
ICICI Bank (IBL) reported its 4QFY19 results with the key pointers being: (1) Gross slippage was Rs 35.47bn in 4QFY19 compared with an 8-quarter average of Rs 80.46bn till 4QFY18, indicating IBL continues to see a lower slippage regime. (2) Global NIM expanded 32 bps QoQ to 3.72% driven by a 29 bps expansion in yield on advances (3) Core fee income growth was 15% YoY driven by retail fees whereas higher operating expenses growth at 19.6% YoY was driven by retiral provisions (See comprehensive conference call takeaways on page 2 for significant incremental colour). Per se, on the key P&L items, IBL posted NII growth of 27% YoY at Rs76,201mn, PPOP decline of 17% YoY at Rs62,334mn and PAT decline of 5% YoY at Rs9,691mn. We have revised our estimates for FY20/FY21 and retained Buy rating on IBL, revising our target price to Rs483 (from Rs 462 earlier), valuing the stock at 1.6x FY21E standalone P/BV and ascribing a value of Rs 142 for subsidiaries.
ICICI Bank reported a stable third quarter performance with sharp improvement in asset quality. Slippages have moved to normalized levels (1.5% of loans), gross NPA ratio is at a two-year low while net NPA ratio is at a three-year low. As incremental stress additions reduce, decline in credit costs will support ROE normalization. Levers are in place for continued traction and performance is expected to improve hereon. ICICIBC is entering a new phase characterised by better asset quality, healthy credit growth and superior margins. We expect the bank to be well placed to capitalise on the credit up-cycle and expect management to achieve its near-term RoE target of 15%. Subsidiaries remain profitable and add meaningfully to SOTP. We assign a BUY on the stock with a target price of Rs 410 (on SOTP assigning 2xcore ABV and sub. value of Rs 80).