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Please refer to important disclosures at the end of this report 1

Particulars (` cr) 1QFY13 4QFY12 % chg (qoq) 1QFY12 % chg (yoy)

NII 3,193 3,105 2.8 2,411 32.4

Pre-prov. profit 2,949 3,112 (5.2) 2,234 32.0

PAT 1,815 1,902 (4.6) 1,332 36.2 Source: Company, Angel Research

ICICI Bank reported strong performance for 1QFY2013, with 36.2% growth in Net profit, which was in-line with our estimates. Growth in earnings came largely on account of solid operating performance, with 32.0% yoy higher pre provisioning profits and was also aided by continued improvement on the asset quality front.

Overall NIMs flattish sequentially; Asset quality improved marginally qoq: During the quarter, advances for the bank increased by healthy 21.6% yoy (5.8% qoq), aided by a strong 45.6% yoy (15.0% qoq) growth in corporate book, 37.0% yoy (5.0% qoq) growth in SME book, and 36.2% yoy growth in Overseas book (excl. positive impact of INR depreciation growth in overseas and overall advances would have been ~8.0% and ~17.0% yoy, respectively). Deposits accretion remained healthy during the quarter with growth of 16.1% yoy (4.8% sequentially). Despite healthy accretion in savings deposits, subdued current account deposits led the CASA ratio for the bank to decline to 40.6%. Domestic NIMs remained flat sequentially at 3.3%; while, Overseas NIMs improved by ~10bp to 1.6%. Growth in non-interest income (excl. treasury) remained moderate at 14.0% yoy, on back of moderation in corporate fee income. Misc. other income for the bank grew to `254cr from `90cr in 1QFY2012, aided mainly by higher dividend income of ~`208cr. The bank’s asset quality improvement continued during this quarter as well, with both gross and net NPA ratio declining (though marginally), on a sequential basis. Provision coverage ratio remained healthy at 80.6%. The bank restructured additional advances worth ~`350cr during the quarter, in line with their guidance. As of 1QFY2013, their outstanding restructured book (which is stated post upgradation on one year of satisfactory performance) stood at `4,172cr. The management indicated that no major restructuring is in the pipeline. They also specified that based on their past experiences, slippages from restructured assets is ~5-6%.

Outlook and valuation: The bank’s substantial branch expansion in the past 3-4 years is expected to sustain a far more favourable deposit mix going forward. Moreover, a lower risk balance sheet has driven down NPA provisioning costs, which we believe will enable RoE of 15.5% by FY2014E (with further upside from financial leverage). At the CMP, the bank’s core banking business (after adjusting for subsidiaries) is trading at 1.48x FY2014E ABV (including subsidiaries, at 1.46x FY2014E ABV). We maintain our Buy recommendation on the stock with a target price of `1,169.

Key financials (Standalone) Y/E March (` cr) FY2011 FY2012 FY2013E FY2014E

NII 9,017 10,734 13,706 16,635

% chg 11.1 19.0 27.7 21.4

Net profit 5,151 6,465 7,915 9,451

% chg 40.9 25.5 22.4 19.4

NIM (%) 2.6 2.7 2.9 3.0

EPS (`) 44.7 56.1 68.7 82.0

P/E (x) 20.3 16.2 13.2 11.1

P/ABV (x) 1.9 1.7 1.6 1.5

RoA (%) 1.3 1.3 1.4 1.4

RoE (%) 11.7 12.8 14.2 15.5 Source: Company, Angel Research

BUY CMP `928 Target Price `1,169

Investment Period 12 Months Stock Info

Sector Banking

Market Cap (` cr) 106,688

Beta 1.3

52 Week High / Low 1059/641

Avg. Daily Volume 527,313

Face Value (`) 10

BSE Sensex 16,839

Nifty 5,100

Reuters Code ICBK.BO

Bloomberg Code ICICIBC@IN

Shareholding Pattern (%)

Promoters -

MF / Banks / Indian Fls 27.7

FII / NRIs / OCBs 62.7

Indian Public / Others 9.6

Abs. (%) 3m 1yr 3yr

Sensex (1.7) (8.6) 9.5

ICICI Bank 7.8 (9.4) 22.5

Vaibhav Agrawal 022 – 3935 7800 Ext: 6808

[email protected]

Varun Varma

022 – 3935 7800 Ext: 6847

[email protected]

Sourabh Taparia

022 – 3935 7800 Ext: 6872

[email protected]

ICICI Bank Performance Highlights

1QFY2013 Result Update | Banking

July 27, 2012

ICICI Bank | 1QFY2013 Result Update

July 27, 2012 2

Exhibit 1: 1QFY2013 performance (Standalone)

Particulars (` cr) 1QFY13 4QFY12 % chg (qoq) 1QFY12 % chg (yoy) FY2012 FY2011 % chg (yoy)

Interest earned 9,546 9,175 4.0 7,619 25.3 33,543 25,974 29.1

- on Advances / Bills 6,456 6,128 5.3 4,935 30.8 22,130 16,425 34.7

- on investments 2,702 2,615 3.3 2,251 20.0 9,684 7,905 22.5

- on balance with RBI & others 124 128 (3.4) 114 8.6 491 367 33.9

- on others 264 303 (12.8) 319 (17.0) 1,238 1,277 (3.1)

Interest Expended 6,353 6,070 4.7 5,208 22.0 22,809 16,957 34.5

Net Interest Income 3,193 3,105 2.8 2,411 32.4 10,734 9,017 19.0

Other income 1,880 2,228 (15.6) 1,643 14.4 7,503 6,648 12.9

Other income excl. treasury 1,901 2,070 (8.2) 1,668 14.0 7,515 6,863 9.5

- Fee income 1,647 1,728 (4.7) 1,578 4.4 6,707 6,419 4.5

- Treasury income (21) 158 (113.3) (25) (16.0) (12) (215) (94.4)

- Other income 254 342 (25.9) 90 182.5 808 444 82.1

Operating income 5,073 5,333 (4.9) 4,054 25.1 18,237 15,665 16.4

Operating expenses 2,124 2,222 (4.4) 1,820 16.7 7,850 6,617 18.6

- Employee expenses 987 1,103 (10.5) 733 34.7 3,515 2,817 24.8

- Other Opex 1,137 1,119 1.6 1,087 4.6 4,335 3,800 14.1

Pre-provision Profit 2,949 3,112 (5.2) 2,234 32.0 10,386 9,048 14.8

Provisions & Contingencies 466 469 (0.7) 454 2.6 1,583 2,287 (30.8)

PBT 2,483 2,642 (6.0) 1,780 39.5 8,803 6,761 30.2

Provision for Tax 668 741 (9.7) 448 49.2 2,338 1,609 45.3

PAT 1,815 1,902 (4.6) 1,332 36.2 6,465 5,151 45.3

Effective Tax Rate (%) 26.9 28.0 (111)bp 25.2 175bp 26.6 23.8 276bp

Source: Company, Angel Research

Exhibit 2: 1QFY2013 – Actual vs. estimates

Particulars (` cr) Actual Estimates Var. (%)

Net interest income 3,193 3,085 3.5

Other income 1,880 2,046 (8.1)

Operating income 5,073 5,131 (1.1)

Operating expenses 2,124 2,110 0.6

Pre-prov. profit 2,949 3,021 (2.4)

Provisions & cont. 466 557 (16.4)

PBT 2,483 2,464 0.8

Prov. for taxes 668 705 (5.2)

PAT 1,815 1,759 3.2



July 27, 2012 3

Exhibit 3: 1QFY2013 performance analysis (Standalone)

Particulars 1QFY13 4QFY12 % chg (qoq) 1QFY12 % chg (yoy)

Balance sheet Advances (` cr) 268,430 253,728 5.8 220,693 21.6

Deposits (` cr) 267,794 255,500 4.8 230,678 16.1

Credit-to-Deposit Ratio (%) 100.2 99.3 93bp 95.7 457bp

Current deposits (` cr) 30,754 34,973 (12.1) 29,796 3.2

Saving deposits (` cr) 77,923 76,046 2.5 66,858 16.6

CASA deposits (` cr) 108,677 111,019 (2.1) 96,654 12.4

CASA ratio (%) 40.6 43.5 (287)bp 41.9 (132)bp

CAR (%) 18.5 18.5 2bp 19.6 (103)bp

Tier 1 CAR (%) 12.8 12.7 10bp 13.4 (58)bp

Profitability Ratios (%) Reported NIM 3.0 3.0 0bp 2.6 41bp

Cost-to-income ratio 41.9 41.7 20bp 44.9 (303)bp

Asset quality Gross NPAs (` cr) 9,817 9,475 3.6 9,983 (1.7)

Gross NPAs (%) 3.5 3.6 (8)bp 4.4 (82)bp

Net NPAs (` cr) 1,905 1,861 2.4 2,303 (17.3)

Net NPAs (%) 0.7 0.7 (2)bp 1.0 (33)bp

Provision Coverage Ratio (%) 80.6 80.4 20bp 76.9 370bp

Provision exps. to avg. assets (%) 0.4 0.4 (1)bp 0.4 (5)bp


Business growth healthy, Overall NIMs flattish qoq

During 1QFY2013, advances for the bank increased by healthy 21.6% yoy (5.8% qoq), aided by a strong 45.6% yoy (15.0% qoq) growth in corporate book, 37.0% yoy (5.0% qoq) growth in SME book, and 36.2% yoy growth in Overseas book (excl. the positive impact of INR’s depreciation, the growth in international advances and overall loan book would have been much lower at ~8.0% and ~17.0%, respectively). Rural segment loans de-grew by 1.5% yoy (down by 7.4% qoq on account of higher priority sector lending in the 4QFY2012, reflecting the year ending phenomena). Retail loans grew at relatively slower pace of 9.0% yoy (1.3% qoq), partly due to the bank’s conscious strategy to reduce the share of unsecured personal and credit card loans. Personal loans were lower by a sharp 57.2% yoy, while credit card loans were lower by 7.5% yoy. Secured vehicle and housing advances grew by 14.7% and 10.3% yoy, respectively. Consequently, the retail advances as proportion of overall loan book came at 34.0% as of 1QFY2013 compared to 37.5% as of 1QFY2012 and 35.5% as of 4QFY2012.

Deposits accretion remained healthy during the quarter with growth of 16.1% yoy (4.8% sequentially). Consequentially, credit to deposit ratio for the bank rose sharply to 100.2% in 1QFY2013 from 99.3% in 4QFY2012 and 95.7% in 1QFY2012. Defying industry wide moderation, the bank managed healthy growth of 16.6% yoy in savings deposits. However, growth in current deposits remained muted at 3.2% yoy (though better than peers). Despite healthy accretion in savings deposits, subdued current account deposits led the CASA ratio for the bank to decline 132bp yoy (287bp sequentially) to 40.6%.


July 27, 2012 4

Reported overall NIM remained flat sequentially to 3.0%, mainly on account of flattish domestic NIMs despite marginal qoq improvement in overseas NIMs. Domestic NIMs remained flat sequentially at 3.3%. Overseas NIM further improved sequentially to 1.6% from 1.52% in 4QFY2012.

Going ahead, Management expects the banks’ domestic loan book to grow by ~20% in FY2013 mainly driven by 15-20% yoy growth in secured retail loans and 20%+ growth in corporate book emanating from existing sanctions. They anticipate the bank’s consolidation in overseas loan book (in USD terms) to continue in current year as well, however depreciating INR might lead to growth in overseas loan book in INR terms. According to the management, overall NIMs for FY2013 are likely to improve sequentially to ~3.0% compared to 2.7% in FY2012.

Exhibit 4: Strong credit growth, aided by INR depreciation

Particulars (` cr) 1QFY13 4QFY12 % chg (qoq) 1QFY12 % chg (yoy) % to total

Rural 20,669 22,328 (7.4) 20,987 (1.5) 7.7

Overseas 75,160 69,521 8.1 55,173 36.2 28.0

Corporate 67,107 58,357 15.0 46,086 45.6 25.0

SME 14,227 13,448 5.8 10,386 37.0 5.3

Retail 91,266 90,073 1.3 83,734 9.0 34.0

- Housing 59,506 57,647 3.2 53,924 10.3 22.2

- Vehicle 25,828 26,572 (2.8) 22,524 14.7 9.6

- Personal 1,004 991 1.3 2,345 (57.2) 0.4

- Credit cards 2,555 2,522 1.3 2,763 (7.5) 1.0

- Other retail 2,373 2,342 1.3 2,177 9.0 0.9 Total Advances 268,430 253,728 5.8 216,366 24.1 100.0


Exhibit 5: CDR high due to overseas loan growth


Exhibit 6: CASA ratio declines on subdued Current deposits


95.7 95.5 94.5 99.3 100.2

60.0

70.0

80.0

90.0

100.0

110.0

(3.0)

-

3.0

6.0

9.0

1QFY12 2QFY12 3QFY12 4QFY12 1QFY13

Adv. qoq growth Dep. qoq growth CDR (%, RHS)

41

.9

42

.1

43

.6

43

.5

40

.6

14.2

5.1

18.0

9.1

12.4

-

10.0

20.0

25.0

30.0

35.0

40.0

45.0


CASA ratio (%) CASA yoy growth (%)- RHS


July 27, 2012 5

Exhibit 7: NIMs remains flat sequentially


Exhibit 8: NII growth higher by 200bp, due to INR depreciation


Fee income moderation continues

During 1QFY2013, non interest income excl. treasury for the bank increased by 14.0% yoy to `1,901cr, on back of continued trends of moderation in the fee income. Fee income growth remained subdued at 4.4% yoy to `1,647cr, mainly due to moderation in corporate fee income despite traction witnessed in income from forex and derivative, transaction banking and remittance segments. The bank registered a treasury loss of `21cr compared to a loss of `25cr in 1QFY2012, as poor performance of the equities portfolio and `100cr MTM loss on securities receipts completely offset the MTM gain on the fixed income portfolio. Other income for the bank grew to `252cr from `90r in 1QFY2012, mainly aided by annual dividend of `133cr received from ICICI Bank Canada and `75cr recurring dividend from its life insurance subsidiary.

The management has maintained its guidance for fee income growth in low double digits for FY2013, on account of, continued traction anticipated in transaction banking and remittance business; while stabilization is expected in corporate fee income.

Exhibit 9: Other Income aided by dividends from subsidiaries Particulars (` cr) 1QFY13 4QFY12 % chg (qoq) 1QFY12 % chg (yoy)

Fee income 1,647 1,728 (4.7) 1,578 4.4

Treasury (21) 158 (113.3) (25) (16.0)

Others 254 342 (25.7) 90 182.6

Other income 1,880 2,228 (15.6) 1,643 14.4

Other income excl. treasury 1,901 2,070 (8.2) 1,668 14.0


2.6 2.6 2.7

3.0 3.0

1.0

1.5

2.0

2.5

3.0

3.5


NIM (Reported, %)

21.1

13.7 17.3

23.7

32.4

-

5.0

10.0

15.0

20.0

25.0

30.0

35.0

2,000 2,150 2,300 2,450 2,600 2,750 2,900 3,050 3,200 3,350


NII (` cr) YoY growth (%, RHS)


July 27, 2012 6

Exhibit 10: Fee income moderation continues


Exhibit 11: Still healthy share of fee income in RoA


Asset quality continues to improve

Continuing the trends in the past few quarters, the bank’s asset quality improved during 1QFY2013 as well, with both gross and net NPA ratio declining (though marginally) by 8bp and 2bp, respectively on a sequential basis. As of 1QFY2013 gross NPA ratio stands at 3.5% (3.6% in 4QFY2012), while net NPA ratio stands at 0.7% (0.7% in 4QFY2012). PCR for the bank improved by 20bp during the quarter and remained healthy at 80.6%.

During 1QY2013, annualized slippages ratio for the bank stood at 1.29%, compared to 1.17% in 4QFY2012 and 1.39% in 1QFY2012. The bank restructured additional ~`350cr during the quarter, in line with their guidance. As of 1QFY2013, their restructured book (which is stated at outstanding amount, post upgradation on one year of satisfactory performance) stood at `4,172cr. The management indicated that no major restructuring is in the pipeline. They also specified that based on their past experiences, slippages from total cumulative restructured book is ~5-6%. Further, they have maintained their guidance for credit cost (including standard asset provisioning) to be 75bp for FY2013.

Exhibit 12: O/s Restructured book trends


Exhibit 13: Declining NPAs with improving coverage


1,5

78

1,7

00

1,7

01

1,7

28

1,6

47

11.7

6.9 4.7

(3.5)

4.4

(5.0)

-

5.0

10.0

15.0

1,500

1,600

1,700

1,800


Fee Income (` cr) yoy growth (%, RHS)

1.5 1.6

1.5 1.5

1.4

1.0

1.1

1.2

1.3

1.4

1.5

1.6

1.7


Fee income to average assets (%)

1,966 2,501

3,070

4,256 4,172

-

750

1,500

2,250

3,000

3,750

4,500


(` cr)

4.4

4.1

3.8

3.6

3.5

1.0

0.9

0.8

0.7

0.7

76.9 78.2 78.980.4 80.6

60.0

65.0

70.0

75.0

80.0

85.0

-

1.0

2.0

3.0

4.0

5.0


Gross NPAs (%) Net NPAs (%) Coverage ratio (%, RHS)


July 27, 2012 7

Operating costs rise due to higher employee expenses

Operating expenses increased by 16.7% yoy, primarily on back of 34.7% increase in employee expenses. However, the increase in operating income was much higher at 25.1% yoy, which led to a 303bp yoy decline in cost-to-income ratio to 41.9%. Operating expenses to average assets ratio remained flat on a yoy basis at 1.8%. The management expects to maintain cost-to-income ratio in the range of 41-42% for FY2013.

Exhibit 14: Higher staff costs increased total opex


Exhibit 15: Cost-to-income ratio lower on a yoy basis


Under-leveraged branch network

The number of branches for the bank has almost doubled over the past three years. Branch network improvement was partly aided by the merger with the Bank of Rajasthan. This extensive pan India network of 2755 branches as of 1QFY2013 is under-leveraged, as reflected in the falling CASA deposits/branch of ~`39cr compared to `65cr as of 3QFY2008 and the total assets/branch of `175cr compared to `394cr as of 3QFY2008.

Management plans to add 200-250 branches in current year. Going forward, we expect the bank to leverage this network to grow its CASA market share.

Exhibit 16: Robust branch expansion


Exhibit 17: Under-leveraged branch network


1,0

87

1,0

50

1,0

80

1,1

19

1,1

37

73

3

84

3

83

7

1,1

03

98

7

-

10.0

20.0

30.0

-

500

1,000

1,500

2,000

2,500


Other opex Staff exps Opex yoy growth (RHS)(` cr) (%)

44

.9

44

.6

41

.6

41

.7

41

.9

1.8 1.8 1.7

1.9

1.8

1.4

1.5

1.6

1.7

1.8

1.9

2.0

30.0

35.0

40.0

45.0

50.0


Cost-to-income ratio (%) Opex to avg assets (%, RHS)

1,4

71

2,0

16

2,5

33

2,7

55

-

400

800

1,200

1,600

2,000

2,400

2,800

2Q

FY0

9

3Q

FY0

9

4Q

FY0

9

1Q

FY1

0

2Q

FY1

0

3Q

FY1

0

4Q

FY1

0

1Q

FY1

1

2Q

FY1

1

3Q

FY1

1

4Q

FY1

1

1Q

FY1

2

2Q

FY1

2

3Q

FY1

2

4Q

FY1

2

1Q

FY1

3

-

10

20

30

40

50

60

-

90

180

270

360

450

2Q

FY0

9

3Q

FY0

9

4Q

FY0

9

1Q

FY1

0

2Q

FY1

0

3Q

FY1

0

4Q

FY1

0

1Q

FY1

1

2Q

FY1

1

3Q

FY1

1

4Q

FY1

1

1Q

FY1

2

2Q

FY1

2

3Q

FY1

2

4Q

FY1

2

1Q

FY1

3

Total Assets/Branch (` cr) CASA Deposits/Branch (` cr, RHS)


July 27, 2012 8

Overview of performance of subsidiaries

Consolidated net profit for 1QFY2013 rose by a healthy 24.6% yoy to `2,077cr.

Consolidated reported RoE’s for 1QFY2013 improved to 13.3% from 12.0% in 1QFY2012. However, overseas subsidiaries of the bank (viz. ICICI Bank Canada and ICICI Bank UK) continue to remain a drag on the consolidated RoE’s, as both remain over capitalized, reflecting bank’s strategy of consolidating their operations (CAR in excess of 31% in both), and profitability also continue to decline for both of them (1QFY2013 PAT for ICICI Bank UK and ICICI Bank Canada declined by 12.0% and 3.3%, respectively).

The bank received ~`133cr as annual dividend from its Canadian subsidiary in 1QFY2013. In the short term, we expect the over-capitalized subsidiaries to drag the consolidated RoEs.

ICICI Prudential Life reported PAT of `349cr for 1QFY2013, registering a growth of 13.8% yoy and maintained its leadership position with a market share of 5.3% based on retail weighted received premium. The bank also received a dividend of `75cr in 1QFY2013 from ICICI life, which is expected to recur in the forthcoming quarters as well.

ICICI Lombard General Insurance reported PAT of `83cr for 1QFY2013 compared to `40cr in 1QFY2012.

ICICI Home Finance reported PAT of `49cr for 1QFY2013, which was lower by 30.4% on a yoy basis.

1QFY2013 performance of other smaller subsidiaries was healthy. Both ICICI Securities and ICICI Venture reported PAT growth of 20% yoy, while ICICI Securities PD registered strong 43.0% yoy growth in its PAT. Performance of ICICI AMC was moderate, as reported PAT grew by 12.0% yoy.


July 27, 2012 9

Exhibit 18: Performance of subsidiaries

Subsidiary Parameter 1QFY13 1QFY12 % chg

ICICI Bank UK PAT (USD mn) 4.4 5.0 (12.0)

ICICI Bank Canada PAT (CAD mn) 11.9 12.3 (3.3)

ICICI Bank Eurasia PAT (USD mn) 1.2 (0.3) (500.0)

ICICI Home Finance PAT (` cr) 49 70 (30.4)

ICICI Prudential Life Insurance APE (` cr) 570 443 28.7

NBP (` cr) 85 71 19.7

NBP margin (%) 15.0 16.0 (6.3)

AuM (` cr) 70,435 67,447 4.4

PAT (` cr) 349 339 2.9

ICICI Lombard Gen. Insurance Gross Premium (` cr) 1,532 1,303 17.6

PAT (` cr) 83 40 107.5

ICICI Securities PAT (` cr) 12 10 20.0

ICICI Securities PD PAT (` cr) 33 23 43.5

ICICI Venture PAT (` cr) 6 5 20.0

ICICI Prudential AMC PAT (` cr) 28 25 12.0


Investment arguments

Well positioned to garner strong market share gains in CASA deposits

In our view, the bank’s substantial branch expansion from 955 branches at the end of 3QFY2008 to 2,755 branches by 1QFY2013, and strong capital adequacy, at 18.5% (Tier-I at 12.8%) have positioned it to gain both CASA and credit market share, respectively. In fact, the bank has once again started gaining market share in savings accounts since FY2010. Over FY2010-12, the bank improved its market share of savings deposits by 14bp, capturing a substantial 5.6% incremental market share.

Improved deposit mix to lead to better NIM

The bank’s strategic transformation has expectedly resulted in significantly better balance sheet and earnings quality. The distinguishing feature of the bank’s performance in FY2010 was the improvement in CASA ratio to 42.1% (transformative considering that the ratio was as low as 22% at the end of FY2007 and 29% even as recently as FY2009). CASA ratio has remained healthy at 40.6% even in 1QFY2013. Apart from the paradigm shift in the deposit mix reflected in its 40.6% CASA ratio, the bank has largely exited unattractive business segments such as small-ticket personal loans in the domestic segment and most non-India related exposures in its international business.

Asset quality trends remain healthy

The bank’s asset quality continues to show further improvement, with a stable to declining trend in additions to gross as well as net NPAs. For 1QFY2013 annualized gross slippages ratio stood at comfortable ~1.29%. Also, the bank has maintained a comfortable provision coverage ratio of 80.6% as of 1QFY2013.


July 27, 2012 10

Though, the bank has made addition of ~`350cr in its gross restructured book, its outstanding restructured book stated after upgradation of accounts on one year of satisfactory performance came down to ~`4,172cr. Further, the management has indicated that no major restructuring is in the pipeline. They also specified that based on their past experiences, slippages from restructured assets is ~5-6%.

The reduction in risk profile of advances has expectedly resulted in commensurate decline in NPA provisioning costs and reflected in improved RoA from 1.0% in FY2010 to 1.3% in FY2012. Further management expects to improve its RoAs by ~20bp over FY2013-14E, which we believe is achievable.

Valuations attractive

We have a positive view on ICICI Bank, given its market-leading businesses across the financial services spectrum. Moreover, we believe the bank is decisively executing a strategy of consolidation, which has resulted in an improved deposit and loan mix and should drive improved operating metrics over the medium term. The bank’s substantial branch expansion in the past 3-4 years is expected to sustain a far more favorable deposit mix going forward. Moreover, a lower risk balance sheet has driven down NPA provisioning costs, which we believe will drive 20.9% CAGR in net profit over FY2012-14E and enable RoE of 15.5% by FY2014E (with further upside from financial leverage).

At the CMP, the bank’s core banking business (after adjusting `153/share towards value of the subsidiaries) is trading at 1.48x FY2014E ABV (including subsidiaries, the stock is trading at 1.46x FY2014E ABV). We value the bank’s subsidiaries at `153/share and the core bank at `1,016/share (2.0x FY2014E ABV). We maintain our Buy rating on the stock with a target price of `1,169. Exhibit 19: SOTP valuation summary

Particulars Target multiple Value/share (`)

ICICI Bank 2.0x FY2014E ABV 1,016

Life Insurance 16.0x FY2014E NBP 76

General Insurance 10x FY2012 PAT 14 Others (Home Fin, AMC, VC, Securities Securities PD and Overseas subsidiaries) 64

SOTP value 1,169

Source: Angel Research


July 27, 2012 11

Exhibit 20: Key assumptions

Particulars (%) Earlier estimates Revised estimates

FY2013 FY2014 FY2013 FY2014

Credit growth 18.0 23.0 20.0 23.0

Deposit growth 19.0 23.0 16.0 23.0

CASA ratio 43.5 42.9 43.4 43.3

NIMs 2.8 2.9 2.9 3.0

Other income growth 21.9 21.6 14.2 22.4

Growth in staff expenses 22.0 22.0 22.0 24.0

Growth in other expenses 17.0 18.0 17.0 17.0

Slippages 1.5 1.6 1.5 1.6

Treasury gain/(loss) (% of investments) 80.0 77.0 80.0 77.0


Exhibit 21: Change in estimates

Particulars (` cr) FY2013 FY2014

Earlier estimates

Revised estimates Var. (%) Earlier

estimates Revised

estimates Var. (%)

NII 13,276 13,706 3.2 15,854 16,635 4.9

Non-interest income 9,092 8,650 (4.9) 11,004 10,522 (4.4)

Operating income 22,368 22,356 (0.1) 26,857 27,157 1.1

Operating expenses 9,361 9,361 - 11,217 11,252 0.3

Pre-prov. profit 13,008 12,995 (0.1) 15,640 15,904 1.7

Provisions & cont. 1,991 1,938 (2.7) 2,397 2,422 1.1

PBT 11,017 11,057 0.4 13,243 13,482 1.8

Prov. for taxes 3,153 3,142 (0.3) 3,981 4,031 1.3

PAT 7,864 7,915 0.6 9,263 9,451 2.0


Exhibit 22: Angel EPS forecast vs. consensus

Year (`) Angel forecast Bloomberg consensus Var. (%)

FY2013E 68.7 66.5 3.2

FY2014E 82.0 78.6 4.3

Source: Bloomberg, Angel Research


July 27, 2012 12

Exhibit 23: P/ABV band


Exhibit 24: P/E band


Exhibit 25: ICICI Bank – Premium/Discount to the Sensex

Source: Bloomberg, Angel Research

-

300

600

900

1,200

1,500

1,800

2,100

Mar

-06

Jul-

06

Nov

-06

Mar

-07

Jul-

07

Nov

-07

Mar

-08

Jul-

08

Nov

-08

Mar

-09

Jul-

09

Nov

-09

Mar

-10

Jul-

10

Nov

-10

Mar

-11

Jul-

11

Nov

-11

Mar

-12

Jul-

12

Nov

-12

Mar

-13

Price (`) 1x 1.5x 2x 2.5x 3x

0

400

800

1,200

1,600

2,000

2,400

2,800

Apr

-05

Sep-

05

Feb-

06

Jul-

06

Dec

-06

May

-07

Oct

-07

Mar

-08

Aug

-08

Jan-

09

Jun-

09

Nov

-09

Apr

-10

Sep-

10

Feb-

11

Jul-

11

Dec

-11

May

-12

Price (`) 7x 17x 27x 37x

(40)

(20)

0

20

40

60

80

100

Apr

-06

Aug

-06

Dec

-06

Apr

-07

Aug

-07

Dec

-07

Apr

-08

Aug

-08

Dec

-08

Apr

-09

Aug

-09

Dec

-09

Apr

-10

Aug

-10

Dec

-10

Apr

-11

Aug

-11

Dec

-11

Apr

-12

Premium/Discount to Sensex Avg. Historical Premium(%)


July 27, 2012 13

Exhibit 26: Recommendation summary

Company Reco. CMP (`)

Tgt. price (`)

Upside (%)

FY2014E P/ABV (x)

FY2014E Tgt. P/ABV (x)

FY2014E P/E (x)

FY2012-14E EPS CAGR (%)

FY2014E RoA (%)

FY2014E RoE (%)

AxisBk Buy 998 1,373 37.6 1.3 1.9 7.0 18.1 1.6 20.8

FedBk Neutral 401 - - 1.0 - 7.0 11.4 1.3 14.5

HDFCBk Neutral 584 - - 3.3 - 16.2 27.9 1.8 22.0

ICICIBk* Buy 928 1,169 26.0 1.5 1.9 11.3 20.9 1.4 15.5

SIB Neutral 23 - - 0.9 - 5.4 9.0 0.9 18.5

YesBk Buy 353 453 28.4 1.8 2.3 8.3 24.2 1.5 23.8

AllBk Buy 129 153 18.4 0.5 0.6 3.1 5.4 0.9 17.4

AndhBk Neutral 100 - - 0.6 - 4.0 2.7 0.9 15.8

BOB Buy 650 877 35.0 0.7 1.0 4.4 10.5 1.1 18.1

BOI Buy 291 354 21.4 0.7 0.9 4.1 23.5 0.8 17.0

BOM Accumulate 45 47 5.0 0.6 0.6 3.9 35.6 0.6 15.5

CanBk Buy 348 421 21.0 0.6 0.8 4.1 7.2 0.8 15.3

CentBk Neutral 69 - - 0.6 - 3.2 103.6 0.6 15.1

CorpBk Buy 391 465 18.9 0.5 0.7 3.6 1.7 0.8 16.1

DenaBk Buy 87 107 22.8 0.5 0.7 3.4 5.1 0.8 16.4

IDBI# Buy 85 109 27.9 0.5 0.7 3.5 22.4 0.9 15.0

IndBk Accumulate 174 197 12.9 0.6 0.7 3.9 6.4 1.1 17.4

IOB Buy 70 91 30.6 0.4 0.6 3.1 30.8 0.7 14.3

J&KBk Accumulate 905 979 8.1 0.8 0.9 4.9 5.1 1.2 17.5

OBC Buy 213 269 26.4 0.5 0.6 3.3 27.8 0.9 14.3

PNB Buy 716 1,000 39.7 0.7 1.0 4.1 9.9 1.0 18.0

SBI* Buy 1,941 2,443 25.9 1.2 1.5 7.3 23.1 1.0 18.1

SynBk Buy 92 114 23.4 0.5 0.7 3.2 15.5 0.8 17.8

UcoBk Neutral 67 - - 0.7 - 3.8 11.4 0.6 15.4

UnionBk Buy 164 245 49.2 0.6 0.9 3.3 23.6 0.8 17.1

UtdBk Buy 53 78 46.4 0.4 0.6 2.4 21.4 0.7 16.2

VijBk Neutral 52 - - 0.6 - 4.5 13.0 0.5 13.3

Source: Company, Angel Research; Note:*Target multiples=SOTP Target Price/ABV (including subsidiaries), #Without adjusting for SASF

Company Background

ICICI Bank is India's largest private sector bank, with a 5.5% market share in credit. The bank has a pan-India extensive network of 2,750+ branches and 9,350+ ATMs as well as large overseas presence (overseas loans comprise 27% of total loans). The bank also has market-leading subsidiaries in life insurance, general insurance and asset management.


July 27, 2012 14

Income statement (Standalone) Y/E March (` cr) FY09 FY10 FY11 FY12 FY13E FY14E

Net Interest Income 9,092 8,114 9,017 10,734 13,706 16,635

- YoY Growth (%) 10.9 (10.8) 11.1 19.0 27.7 21.4

Other Income 7,783 7,108 6,648 7,503 8,650 10,522

- YoY Growth (%) (12.3) (8.7) (6.5) 12.9 15.3 21.6

Operating Income 16,875 15,223 15,665 18,237 22,356 27,157

- YoY Growth (%) (1.2) (9.8) 2.9 16.4 22.6 21.5

Operating Expenses 7,045 5,860 6,617 7,850 9,361 11,252

- YoY Growth (%) (13.6) (16.8) 12.9 18.6 19.2 20.2

Pre - Provision Profit 9,830 9,363 9,048 10,386 12,995 15,904

- YoY Growth (%) 10.1 (4.7) (3.4) 14.8 25.1 22.4

Prov. & Cont. 5,048 4,390 2,290 1,589 1,938 2,422

- YoY Growth (%) 30.4 (13.0) (47.8) (30.6) 21.9 25.0

Profit Before Tax 4,782 4,973 6,758 8,797 11,057 13,482

- YoY Growth (%) (5.4) 4.0 35.9 30.2 25.7 21.9

Prov. for Taxation 1,359 1,317 1,606 2,332 3,142 4,031

- as a % of PBT 28.4 26.5 23.8 26.5 28.4 29.9

PAT 3,423 3,656 5,151 6,465 7,915 9,451

- YoY Growth (%) (17.7) 6.8 40.9 25.5 22.4 19.4

Balance sheet (Standalone) Y/E March (` cr) FY09 FY10 FY11 FY12 FY13E FY14E

Share Capital 1,463 1,465 1,502 1,503 1,503 1,503

- Equity 1,113 1,115 1,152 1,153 1,153 1,153

- Preference 350 350 350 350 350 350

Reserve & Surplus 48,420 50,503 53,939 59,252 64,402 70,573

Deposits 218,348 202,017 225,602 255,500 296,380 364,547

- Growth (%) (10.7) (7.5) 11.7 13.3 16.0 23.0

Borrowings 67,324 60,947 72,813 102,200 129,938 154,911

Tier 2 Capital 25,482 32,967 36,391 37,615 38,367 39,134

Other Liab. & Prov. 18,265 15,501 15,987 17,577 20,559 24,758

Total Liabilities 379,301 363,400 406,234 473,647 551,148 655,427

Cash Balances 17,536 27,514 20,907 20,461 17,783 21,873

Bank Balances 12,430 11,359 13,183 15,768 18,390 21,925

Investments 103,058 120,893 134,686 159,560 182,520 203,955

Advances 218,311 181,206 216,366 253,728 304,473 374,502

- Growth (%) (3.2) (17.0) 19.4 17.3 20.0 23.0

Fixed Assets 3,802 3,213 4,744 4,615 5,221 6,037

Other Assets 24,164 19,215 16,347 19,515 22,761 27,135

Total Assets 379,301 363,400 406,234 473,647 551,148 655,427

- Growth (%) (6.3) (4.4) 9.2 17.1 16.6 19.2


July 27, 2012 15

Ratio analysis (Standalone) Y/E March FY09 FY10 FY11 FY12 FY13E FY14E

Profitability ratios (%) NIMs 2.6 2.4 2.6 2.7 2.9 3.0

Cost to Income Ratio 41.7 38.5 42.2 43.0 41.9 41.4

RoA 0.9 1.0 1.3 1.3 1.4 1.4

RoE 9.2 9.7 11.7 12.8 14.2 15.5

B/S ratios (%) CASA Ratio 28.7 41.7 45.1 43.5 43.4 43.3

Credit/Deposit Ratio 100.0 89.7 95.9 99.3 102.7 102.7

CAR 15.5 19.4 19.5 18.5 18.2 16.2

- Tier I 11.8 14.0 13.2 12.7 11.7 10.6

Asset Quality (%) Gross NPAs 4.3 5.1 4.5 3.6 3.7 3.8

Net NPAs 2.1 2.1 1.1 0.7 0.8 0.9

Slippages 2.2 1.5 1.5 1.3 1.5 1.6

Loan Loss Prov. /Avg. Assets 1.0 1.2 0.5 0.2 0.3 0.3

Provision Coverage 52.8 59.5 76.0 80.4 80.0 77.0

Per Share Data (`) EPS 30.7 32.8 44.7 56.1 68.7 82.0

ABVPS (75% cover.) 425.7 449.8 478.3 524.0 568.7 622.2

DPS 11.0 12.0 14.0 16.5 21.5 25.5

Valuation Ratios PER (x) 29.5 27.7 20.3 16.2 13.2 11.1

P/ABVPS (x) 2.1 2.0 1.9 1.7 1.6 1.5

Dividend Yield 1.2 1.3 1.5 1.8 2.4 2.8

DuPont Analysis NII 2.4 2.3 2.4 2.5 2.7 2.8

(-) Prov. Exp. 1.3 1.2 0.6 0.4 0.4 0.4

Adj. NII 1.1 1.0 1.8 2.1 2.4 2.4

Treasury 0.5 0.2 (0.1) (0.0) 0.0 0.0

Int. Sens. Inc. 1.5 1.2 1.7 2.1 2.4 2.4

Other Inc. 1.6 1.8 1.7 1.6 1.5 1.6

Op. Inc. 3.1 3.0 3.5 3.7 3.9 4.0

Opex 1.9 1.6 1.8 1.8 1.9 1.9

PBT 1.3 1.4 1.7 1.9 2.0 2.1

Taxes 0.4 0.4 0.4 0.5 0.6 0.7

RoA 0.9 1.0 1.3 1.3 1.4 1.4

Leverage 10.1 9.5 9.2 9.6 10.1 10.9

RoE 9.2 9.7 11.7 12.8 14.2 15.5


July 27, 2012 16

Research Team Tel: 022 - 39357800 E-mail: [email protected] Website: www.angelbroking.com DISCLAIMER 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.

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Disclosure of Interest Statement ICICI Bank

1. Analyst ownership of the stock No

2. Angel and its Group companies ownership of the stock No

3. Angel and its Group companies' Directors ownership of the stock No

4. Broking relationship with company covered No

Ratings (Returns): Buy (> 15%) Accumulate (5% to 15%) Neutral (-5 to 5%) Reduce (-5% to -15%) Sell (< -15%)

Note: We have not considered any Exposure below ` 1 lakh for Angel, its Group companies and Directors

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