ICICI Bank:Expect earnings CAGR of 23%+; Rising RoEs to drive more re-rating

17 January 2013

Update | Sector: Financials

ICICI Bank

BSE Sensex

S&P CNX

19,964

6,039

Bloomberg

ICICIBC IN

Equity Shares (m)

1,152.8

M.Cap. (INR b)/(USD b)

1,359/24

52-Week Range (INR)

1,210/762

1,6,12 Rel.Perf.(%)

-2/7/27

CMP: INR1,163

TP: INR1,400

Buy

Set for the next leap

Expect earnings CAGR of 23%+; Rising RoEs to drive more re-rating



Valuation summary (INR b)

Y/E March

2013E 2014E 2015E

NII

138.0 168.0 201.5

131.4 162.5 194.8

81.3 100.2 120.6

NIM (%)

3.0

3.2

EPS (INR)

70.5 86.9 104.6

EPS Gr. (%)

25.8 23.2 20.3

BV/Sh. (INR)* 454.3 510.8 578.6

ROE (%)

14.6 16.1 17.2

ROA (%)

1.6

1.7

Payout (%)

30.0 30.0 30.0

Valuations

P/E (x)

16.5 13.4 11.1

P/BV (x)

2.1

1.9

1.6

Adj P/ABV (x) 2.2

1.9

1.6

*BV adjusted for investment in

susbdiaries, Prices adj for sub value



ICICI Bank (ICICIBC) is expected to deliver EPS CAGR of 23%+ over FY12-15E, on a higher

base of 25%+ over FY10-12, driving up the core RoE from ~10% in FY10 to 17%+ in

FY15E. Importantly, the Tier 1 would remain strong at 10%+ at end-FY15.

With a market share of 4.2% in the domestic loans and largest branch network in the

private financials, above industry growth and favorable margins will drive earnings.

ICICIBC has managed the asset quality well during the last 18 months of pain in the

Indian economy. While FY14 will be critical to see the fate of few large exposures, the

bank is confident of tiding over this without any dent on its profitability. Recovery in

Indian economy / corporate capex will be viewed positive for ICICIBC.

Valuations for ICICIBC will evolve as it delivers RoE improvement over the next 2 years

(to come at the near sector averages). Importantly, it will have scope to further boost

its leverage as capital may get boost from return of capital by key subsidiaries.

Subsidiaries transform from being guzzlers to capital providers to parent

ICICIBC has not infused any capital in its subsidiaries for the past three years.

Corrective measures and consolidation has led to significant CRAR improvement

for ICICI UK and ICICI Canada. Presently, most of the bank's subsidiaries have

become self-sufficient. In the medium term, listing of life insurance business

[capital support of INR49b (our estimate) under Basel III] and repatriation of

capital from international subsidiaries will reduce capital charge ensuring

dilution-free growth.

Core operations improve decisively, core RoE to reach 17%+ by FY15E

Shareholding pattern %

As on

Promoter

Dom. Inst

Foreign

Others

Dec-12 Sep-12 Dec-11

0.0

24.8

66.5

8.7

0.0

25.3

65.8

8.9

0.0

27.8

61.8

10.4

ICICIBC's risk adjusted margins (RAM) have improved sharply from a low of 1% in

FY10 to 2.2% in FY12, led by a 95bp fall in credit cost and 25bp by margins

improvement. Despite lower growth in fee income, continuous margin

improvement (~50bp over FY12-15) and strong asset quality performance will

translate into strong RoA's of ~1.7% and core RoE is expected to improve to 17%+.

Significant improvement in asset quality in challenging times

Even in challenging times, ICICIBC exhibited strong performance in asset quality,

with GNPA percentage declining over the past 10 quarters and provision coverage

ratio increasing from 53% in FY09 to 79% in 1HFY13. With retail delinquencies at

its historic lows credit cost estimates of average 70bp over FY13E-15E, compared

to 40bp in FY12, is conservative and factors the higher stress in corporate portfolio

leaving lower downside risk to our estimates.

Stock performance (1 year)

Structural changes to ensure higher return ratios; valuation attractive

Return ratios are on an upward trajectory and structurally core operations of

ICICIBC has improved significantly, which would enable it to sustain the ratios.

Further unlocking of value from subsidiaries could lead to re-rating of the stock.

ICICIBC trades at near five-year average valuation, which is unwarranted

considering expected improvement in growth and RoE. Maintain

Buy.

ICICI Bank

Story in charts Core operations have improved decisively...



Sharp improvement in liability profile and...



… Better risk management and focused growth (secured

loans)…



… and credit cost is coming down



Cutting excess flab helped to improve/maintain ROA…



… despite being dragged down by fees; expect

contribution to stabilize



… is Yielding results now; margins have improved

structurally



Sharp improvement in CASA ratio, 1.7x since FY08



Asset quality showing sharp improvement



Focused strategies leading to sharp improvement in NIM…



… and fall in credit cost



Lean cost structure now - Adopted branch banking model



Fees growth expected to track balance sheet growth

Source: Company, MOSL

17 January 2013

ICICI Bank

Story in charts ... increasing leverage to boost RoEs



Core operations driving ROAs improvement….



…. Improving leverage will lead to core ROE of 17%+ by

FY15



… capital repatriation and stake sale in insurance to lead

to improvement in Tier I in FY15



Trading at near LPA multiple expect re-rating as RoE's

evolve over next 2 years



Subsidiaries adequately capitalized; unlikely to need

capital anytime soon…



NIM and Credit cost driving ROA higher



RoE on an upward trajectory



Investment in subsidiaries likely to decline



BASEL III: Adequately capitalized till FY15

For illustrative purpose only, capitalization under BASEL III.



With a better RoE, PE below LPA; PBV at LPA

Source: Company, MOSL

17 January 2013

ICICI Bank

Core RoE on the upswing - expect 17%+ by FY15E

Subsidiaries: From capital guzzlers to capital providers for lending business



ICICIBC's core operations have turned around and RoA has improved to 1.5%+ in FY12 led

by 1) higher margins, 2) sharp fall in credit cost and 3) control over opex. However, core

RoE improvement was restricted to just 13% due to strong capitalization (Tier I ratio -

12.5%+).

Improving margins are likely to compensate for any uptick in credit cost. Fee income

growth is expected to track balance sheet growth and as the benefit of correcting operating

inefficiencies is already reaped, fees and opex are unlikely to contribute meaningfully to

RoA improvement. Overall, we expect core RoA to improve to 1.7%+. As ICICIBC would

continue to leverage, core RoE is expected to improve to 17%+ by FY15E.

Subsidiaries have become self-sufficient in funding their own growth. From being capital

guzzlers, they would provide capital to fund the bank’s core lending business.

Moderation in growth and higher capital requirement brought RoEs lower

Cumulative capital

infusion over FY06-08

was of INR305b (~50% of

existing net worth)

Though over FY03-05, ICICIBC reported an average RoE of ~20%, frequent dilutions

(FY05, FY06 and FY08) and consolidation in balance sheet over FY08-10 (post asset

quality issue in FY08) lowered the core RoE to 10% in FY10. The bank raised INR32.5b,

INR78.2b and INR194b in FY05, FY06 and FY08 respectively taking the cumulative capital

infusion to INR305b (~50% of existing net worth). The need to raise capital was 1) to

support domestic business growth and 2) enhance capital in subsidiaries (investment

of INR100b over FY06-10).

International subsidiaries adequately capitalized; Repatriation to boost

capitalization

Repatriation of capital

would give a benefit of

INR14b to Tier I under

current Base II norms and

INR28b under Basel III

ICICIBC has not infused any capital in the international banking subsidiaries for the

past three years. Decline in balance sheet, lower MTM losses and internal accruals

led to significant improvement in capital adequacy ratios for ICICI UK and ICICI Canada

from 17.3% and 23.4% in FY10 to 33.6% and 34.1% in 2QFY13. ICICI Eurasia's CAR also

stands comfortable at 35%. With moderate growth plans for Canada and the UK

subsidiaries, ICICIBC mulls to repatriate excess capital from these subsidiaries.

Once capital is brought back into the parent company, it shall not only translate to

higher RoEs for international subsidiaries but also provide cushion to parent

Capitalization. The bank can potentially repatriate at least half of the capital ie US$350m

from the UK and CAD$500m from Canada. Thus, almost INR42b can be repatriated.

On a standalone basis, ICICIBC deducts 50% of the invested capital (i.e INR28b) in

Canada and UK Subs from Tier I capital and rest from Tier II capital. With repatriation

(assuming 50%), it would eventually give a benefit of INR14b to Tier I under current

Base II norms and INR28b under Basel III (whereby the entire investment in a subsidiary

has to be deducted from Tier I capital).

17 January 2013

ICICI Bank

... and capital gains from ICICI Prulife will keep capitalization healthy

Under Basel III, overall

Tier I capital addition is

likely to be INR49b

(INR41b capital gains plus

INR8.2b deducted from

Tier I) from insurance

stake sale

Adequately

capitalized till FY16

Listing of the insurance venture too shall bring capital for the bank. Based on our current

estimates, it can almost bring INR49b (based on FY15E) potential capital to ICICIBC. Of

this, INR41b would be capital gains which will be directly added to net worth and Tier I

capital. Currently, the principal amount of INR8.2b (for 23% stake) is deducted from Tier

I and Tier II capital both in equal proportion. But under Basel III, the entire amount

would be deducted from Tier I. Hence, under Basel III, overall Tier I capital addition is

likely to be INR49b (INR41b capital gains plus INR8.2b deducted from Tier I) in FY15E.

Unlikely to raise capital till FY16E, unless growth outlook revives sharply

Under Basel III, the bank is likely to take a capital charge of ~100bp, mainly due to

higher deduction of investment in subsidiaries. Repatriation of capital and reduction

in ICICI Prulife’s stake could lead to addition of ~INR41b to net worth and release of

INR36b capital charge while calculating CAR (under Basel III). Hence, we believe ICICIBC

is unlikely to raise capital till FY16. Our base case assumption factors ~20% CAGR in

risk weighted assets, insurance stake sale in FY15E and repatriation of capital from

the UK and Canadian subsidiaries.

Addition to Tier I capital of INR41b

due to insurance stake sale

Basel III: Adequately capitalized at least till FY16E (INR m)

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

Assets

3,633,997 4,062,337 4,736,471 5,295,169 6,293,773 7,532,673 9,039,207 10,847,049 13,016,459

Growth

RWA

2,941,810 3,414,980 3,985,858 4,561,919 5,548,117 6,790,891 8,149,070 9,778,884 11,734,660

As a % of Assets

RoA

1.1

1.3

1.5

1.6

1.7

Payout

Tier I Capital

410,620 449,750

505,183 566,595 568,292 724,248 818,042

930,595 1,065,658

Deductions

123,696 118,882

108,531

99,891 163,221 124,082 124,082

124,082

Investments in subs

64,116

65,412

65,831

65,831 131,661

95,022

Securitisation

36,170

23,590

13,640

5,000

2,500

DTA and Others

23,410

29,880

29,060

Tier I Capital

14.0

13.2

12.7

12.4

10.2

10.7

10.0

9.5

9.1

Tier I under Basel II Guidelines

11.2

Impact of Basel III (in bp)

Note: For illustrative purpose only

Source: Company, MOSL

Impact of higher deduction

is 1% on Tier I capital

Lower deduction on account of insurance stake

sale of INR8b and capital repatriation of INR28b

17 January 2013

ICICI Bank

Frequent equity dilution for growth and capital requirement

of subsidiaries (INR b)

Equity dilution of

Incremental capital infusion in subsidiaries (INR b)

FY07 FY08 FY09 FY10 FY11 FY12

ICICI Pru Life Ins

ICICI Lombard Gen Ins.

ICICI Pru AMC

ICICI Ventures

ICICI Securities

ICICI Home Finance

ICICI Bank UK

ICICI Bank Canada

Overall Investments

% of Netowrth

Networth

6.6

0.7

0.5

3.0

4.0

14.8

6.1

244

12.1

5.5

2.4

5.0

17.7

9.5

52.2

11.2

466

8.6

3.0

3.1

20.0

34.7

7.1

2.5

0.5

490 516 551 596

Source: Company, MOSL

22% of the networth invested in to subsidiaries (INR b)

Expect proportion of investment in subsidiaries (as a % of overall

networth) to come down (%)

Business growth and profitability declined over FY08-10 (%)

Expect core RoE to reach 17%+

Source: Company, MOSL

17 January 2013

ICICI Bank

RAM improves decisively: RoE improvement on the cards

Tight control on opex compensated for muted fee income growth



ICICIBC’s risk adjusted margin (RAM) has improved sharply from a low of 1% in FY10 to 2.2%

in FY12, of which 95bp is led by a sharp fall in credit cost (due to fall in proportion of unsecured

personal loans and credit cards and strong asset quality performance in corporate segment).

Addressing structural issues in the balance sheet and improvement in liability profile led to

a improvement in NIMs of 25bp over FY10-12. Cutting excess flab in the system drove

down cost to core income ratio to ~43% from highs of 58% in FY07.

Overall core PBT (core operating profit less NPA provisions) as a percentage to average

assets has improved to 1.9%+ in FY12 v/s 95bp over FY08-10. Despite a challenging scenario

to generate fee-based income, further improvement in margins and healthy asset quality

performance would keep core PBT strong over FY12-15E.

Sharp improvement in core profitability driven by focused strategies

Increase in credit cost

impacted profitability.

Consolidation for

structural improvement

in balance sheet became

a key mantra.

ICICIBC shifted its focus from aggressive growth (at times sacrificing profitability) and

market share to improving profitability even at the cost of growth. Over FY08-10,

sharp increase in slippages and moderate growth led to higher credit cost of 1.7%,

against an average of 0.5% over FY04-07, whereby RAM moderated to 1% in FY10 v/s

1.4% in FY07. While margins continued to improve post FY08 (NII/average asset

improved from 1.9% in FY07 to 2.2% in FY10) led by an improvement in liability profile,

moderation in growth and benefit of capital raising, higher credit cost kept RAM low

at less than 1.3% over FY08-10. To improve core operating profitability, management

adopted the following strategies:

(A) Unsecured retail loans trimmed to improve asset quality

Unsecured proportion of

loans declined from ~10%

(INR220b) to ~1.3%

(INR35b) at end-FY12

To build a healthy loan portfolio and resolve asset quality issues, ICICIBC reworked its

strategy by running down unsecured retail loan portfolio in favor of low-risk secured

loans and corporate loans. Thus, unsecured proportion of retail loans declined from

9.8% (INR220b) in FY08 to ~1.3% (INR35b) at end-FY12. A shift in portfolio mix towards

secured loans, tighter risk management practices and business loan sourcing via owned

branches instead of DSAs led to better credit appraisal and improvement in asset

quality. Hence, even in a phase of economic moderation, GNPAs declined from 4.6%

in FY10 to 3.1% at end-2HFY13, while NNPAs were down sharply to 66bp, against 1.9%.

Credit cost declined sharply (%)

De-risking loan portfolio by reducing proportion of unsecured loans

Credit cost remained high over FY08-10 due to higher NPAs provision coupled with contracting balance sheet. Benign asset quality in retail

segment and higher proportion of secured loans led to strong asset quality performance over the past 8 quarters.

17 January 2013

ICICI Bank

(B) Structural issues in balance sheet effectively dealt with

Focus on improving CASA

and reducing ALM

mismatches yielded

results

Lower CASA ratio, higher ALM mismatches (both domestic and overseas book), rising

share of international loans and overall aggressive growth leading to higher PSL

requirements etc kept margins lower till FY07 for ICICIBC, despite sharp increase in

high yielding unsecured retail loans. During the liquidity crisis period, margins fell

sharply due to higher roll-over cost of bulk deposits. Even aggressive growth in the

past, which led to risky underwriting, backfired leading to higher NPAs and interest

reversal. To improve margins, management focused on (a) improving CASA ratio (up

from 26% in FY08 to 40%+) and (b) reducing ALM mismatches. Strategies worked and

NIMs improved by 25bp despite higher NPAs in unsecured retail loans.

CASA deposits improved while loans declined in FY10 (INR b)

Share of CASA ratio improved significantly (%)

Continuous improvement in NII to average assets (%)

Margins remained in a

narrow range of 2.1-2.3%

over FY08-10. A sharp

improvement in CASA

ratio during the

consolidation phase led

to structurally higher

NIMs even as the bank

reduced its high-yielding

unsecured loan portfolio

Source: Company, MOSL

Proportion of working capital finance rise; mismatches reduced considerably

ALM improved

significantly as bank

reduced its dependence

on short term bulk

deposits

ICICIBC had a mismatched ALM in FY08, with 65%+ of deposits maturing within a year,

corresponding to only ~30% of loans maturing within the same period. However, it

increased the proportion of working capital finance to the corporate segment and

reduced exposure to short term bulk deposits, which resulted in a well-matched

ALM. Hence, the share of deposits maturing within a year declined to 48% in FY12,

while share of loans maturing within a year was stable at 29%.

17 January 2013

ICICI Bank

ALM Profile: Gap in less than one year bucket reduced considerably

FY07

< 1 1yr -

yr 3 yr

Deposits

Borrowings

Advances

Investments

68.9

41.3

28.1

54.7

29.2

30.9

39.0

17.1

yrs

1.9

27.8

32.9

28.1

FY08

< 1 1yr

yr - 3 yr

64.8

41.7

30.7

57.0

33.2

26.9

34.3

18.7

yrs

2.0

31.4

35.0

24.3

FY09

< 1 1yr

yr - 3 yr

65.8

32.5

24.0

42.4

33.5

35.7

40.6

25.3

yrs

0.7

31.8

35.3

32.3

FY10

< 1 1yr

yr - 3 yr

48.0

27.1

32.0

43.4

51.0

32.1

39.4

24.5

yrs

1.0

40.7

28.6

32.1

FY11

< 1 1yr -

yr 3 yr

44.1

34.1

30.7

35.6

52.2

20.9

41.1

26.7

yrs

FY12

< 1 1yr

yr - 3 yr

yrs

3.7 48.1 27.0 24.9

45.0 46.4 12.4 41.2

28.2 29.2 41.1 29.7

37.7 44.7 15.4 40.0

Source: Company, MOSL

Despite the sharp

increase in branch

network and addition of

Bank of Rajasthan over

FY08-12, other operating

expenses to average

assets ratio declined to

100bp, against 163bp in

FY08

Of the 5C’s strategy introduced in FY08, improving cost efficiency was one of the

bank’s key focus areas. In the process, ICICIBC moved from an agency model to branch

banking to increase utilization of branches and tighten its risk management practices.

This also gave an opportunity to reduce opex as commission to DMA, which formed

25% of other operating expenditure, was significantly brought down to just 4% of

other opex. During FY08-12, operating expenses were largely flat, led by an 8% CAGR

decline in other operating expenses. Despite the sharp increase in branch network

and addition of Bank of Rajasthan over FY08-12, other operating expenses to average

assets ratio declined to 100bp, against 163bp in FY08 (DMA expenses which formed

40bp of average assets is now negligible).

Strong control over opex… (%)

ICICIBC derived

significant gains from

transiting to branch

banking model as against

agency model adopted

earlier

… despite rapid branch expansion is commendable (nos)

Addition of

822 branches*

Addition of

213 branches

Bank continues to grow

organically as well as

inorganically. Branch

network is 2x+ FY08

Addition of

507 branches

Addition of

154 branches

Addition of

291 branches

*Out of which 450 was on account of Bank of Rajasthan merger

17 January 2013

Source: Company, MOSL

ICICI Bank

Cost to average assets

best among peers

Cost to core income ratio improved from ~58% in FY07 to 43% in FY12, while cost to

average assets ratio declined from 2.2% in FY07 to 1.8% in FY12 (compared to 280bp

for HDFCB and 230bp for AXSB) – the best among peers. The lower cost to average

assets ratio is partially led by higher share of international business (25%), compared

to peers.

Cost to average assets ratio compared to peers (%)

Sharp improvement in cost to core income ratio (%)

Domestic cost to core income

ratio is at 47%, in our view

While the cost to average assets ratio increased for peers over FY09-12, ICICIBC reported a sharp improvement and is now the best among peers.

Moderation in balance sheet growth; core profitability improved sharply...

FY08-10:

opex control

helped maintain RoA.

FY10-12:

Sharp reduction

in credit cost drove

RoAs high

As mentioned earlier, ICICIBC effectively used the consolidation in business growth

phase (during FY08-10) to improve its balance sheet profile, address structural ALM

issues, improve risk management practices (credit cost declined to 40bp in FY12,

against 1.2% in FY08), shed excess flab in the system (cost to average asset ratio of

1.8% v/s 2.2% in FY08), reduce the risk on international subs books and for branch

expansion. Combination of these factors led to a sharp improvement in core

profitability, whereby RoA improved to 1.5% v/s 1.1% in FY10, despite pressure on

trading gains and fee income.

Asset quality and margins drive RoA (%)

NIMs and opex control led to stable RoA (%)

Blue indicates positive contribution to RoA; Black indicates negative carry on RoA's

Source: Company, MOSL

17 January 2013

ICICI Bank

…despite fee income being a drag on RoA

Fee income CAGR over FY08-12 was near zero, compared to balance sheet growth of

4.5%+ over the same period. Thus, fee income to average assets ratio gradually declined

from 1.8% in FY08 to 1.5% in FY12 and dragged RoA lower. Deceleration in balance

sheet (especially retail loans), decline in commission from distribution of third party

products and challenging macro environment (lower syndication and capital market

related fees) led to muted fee income performance over FY08-12.

Fee income growth continues to lag loan growth

Deceleration in balance

sheet and decline in

commissions led to lower

fee income growth

Fee income expected to improve over FY13E-15E

Fee income to average assets ratio lower compared

to peers – scope for improvement (%)

FY04-08

1.5 1.6

1.4

FY09-12

1.7

1.8 1.7

1.3

FY13-15E

1.8 1.7

ICICIBC

HDFCB

AXSB

Source: Company, MOSL

17 January 2013

ICICI Bank

Consistently delivering on asset quality

Estimate credit cost of 70bp over FY13-15E



Lower share of unsecured personal loans coupled with improved risk management practices

has helped ICICIBC to show a continuous improvement in asset quality (GNPAs percentage

declining over the past 10 quarters) even in a challenging macro environment.

Retail delinquency is at its historic lows leading to lower credit cost. ICICIBC has utilized this

opportunity to shore up its provision coverage ratio from 53% in FY09 to 79% in 1HFY13. We

are factoring a credit cost of 70bp in the overall portfolio for FY13E. Of which, if we assume

credit cost of 50bp on corporate loan portfolio (given very low delinquency in retail and

international portfolio) and with a 75% PCR, it implies net slippage ratio of 1.75%, which is

fairly conservative in our view.

While some stress in the large corporate segment may emanate, historic performance of

managing stress accounts viz. Kingfisher and Deccan Chronicle and lower restructured loan

portfolio should be given due credit. We estimate credit cost to increase to an average of

70bp over FY13E-15E, compared to 40bp in FY12. However, it would be offset by higher

NIMs and RAM is expected to remain healthy at 2.4%+ over FY13-15E v/s 2.2% in FY12.

Cushion built by improving PCR; Healthy asset quality performance

Improvement in asset

mix, better risk

management practies

led to fall in GNPAs

Aggressive growth in unsecured segment (over FY04-08) followed by moderation in

economic growth exerted pressure on asset quality, with the slippage ratio increasing

to 2.6% over FY09/10, against an average of 1.8% during FY04-08. Overall GNPAs posted

26% CAGR rise over FY07-10, led by 28% CAGR in retail segment GNPAs. However post

FY10, improved risk management practices and sharp reduction in unsecured personal

loans helped bank to show a continuous improvement in asset quality (GNPA %

declining over past ten quarters). And to provide adequate cushion to the balance

sheet, bank prudently increased its provision coverage ratio from 51% in 2QFY10 to

79% (one of the best in the industry) which provides comfort. In our view, benign

asset quality trend in the retail segment and cautious approach adopted would keep

ICICIBC’s asset quality healthy.

Net slippage ratio declined sharply over FY10-12

Consistent improvement in asset quality amidst tough macro

Source: Company, MOSL

17 January 2013

ICICI Bank

Strong growth in corporate segment over FY09-12

Increase in infrastructure

and power segment has

raised concerns;

performance so far better

than expectation

While overall loans clocked a CAGR of 5% over FY09-12, higher growth came from

domestic corporate segment (CAGR of 30%+ over FY09-12), and its share in overall

loans increased from 12% at end-FY08 to 23% at end-FY12. International portfolio and

SME CAGR over FY09-12 was at just 8% and 15% respectively. On a sector-wise analysis,

key growth drivers for ICICIBC over FY09-12 were 1) power (~38% CAGR and now

forms 5.4% of overall loans), 2) infrastructure (24% CAGR and now forms 6.9% of

overall loans) and 3) services – finance (26% CAGR and now forms 6% of overall loans).

Due to challenging macro environment and infrastructure related issues, strong

growth in corporate segment (especially power and infrastructure) remains a risk.

However, asset quality performance so far increases confidence.

Sector-wise GNPAs exhibits healthy trend

FY12

(INR m)

Services- Non Finance

Infrastructure

Iron/steel and products

Services – finance

Food and beverages

Power

Chemical and fertilizers

Wholesale/retail trade

Electronics and engineering

Construction

Mining

194,810

181,960

122,310

156,410

67,790

141,240

34,980

50,060

56,610

57,970

84,030

FY09

7.5

4.2

4.4

3.5

2.4

2.3

1.2

1.6

1.1

0.0

% of overall loans

FY10

FY11

7.2

5.5

4.6

3.4

3.3

3.0

2.5

2.4

1.7

1.0

0.2

7.7

5.8

4.2

7.2

3.1

4.4

1.3

2.3

2.0

1.6

1.8

CAGR

FY12

over

FY09-12

7.4

6.9

4.7

6.0

2.6

5.4

1.3

1.9

2.2

3.2

-12

329

FY09

0.2

N.A.

0.4

1.7

1.9

0.3

3.8

5.6

2.2

N.A.

% GNPA

FY10

FY11

0.3

N.A.

1.7

3.8

2.6

0.2

5.3

4.9

2.2

N.A.

Source:

FY12

0.2

N.A.

0.2

0.8

1.4

0.7

4.1

3.9

0.2

0.1

7.0

4.5

7.4

4.2

1.5

4.2

N.A.

Company, MOSL

Power projects in which ICICIBC participated have a DSCR of 1.5x+ and the average

break-even PLF is ~60%. Of the total power sector exposure, ~30-35% is in the nature

of working capital facilities. Of the project finance exposure, ~65% is covered by

PPAs. Of the total project finance facilities to thermal power generation sector, ~45-

50% of the exposure is based on captive coal. Thus, stress remains manageable.

Healthy performance in retail and international portfolios

Credit cost of 125bp on

corporate/other loan

portfolio and with an

assumption of 75% PCR, it

implies net slippage ratio

of 1.7%, which is

conservative in our view

Retail delinquency is at its historic lows and is also evident in performance of some

peers viz. HDFCB and IIB which are predominantly a retail lender. While credit cost on

retail portfolio would be negligible for FY13, we factor credit cost of 70bp (in line with

management guidance) for the overall portfolio for FY13. Lower credit cost on retail

loans is also driven by healthy recoveries from written off retail accounts in the past.

The international portfolio (25% of overall) is also exhibiting strong performance.

Thus, estimated credit cost would largely (assuming 50bp of 70bp) pertain to domestic

corporate/other loans (40% of overall). This implies credit cost of 125bp on corporate/

other loan portfolio and with an assumption of 75% PCR, it implies net slippage ratio

of 1.7%, which is conservative in our view.

17 January 2013

ICICI Bank

Proactive recognition of NPAs; lower restructured loans

ICICIBC’s handling of some stress accounts viz. Kingfisher and Deccan Chronicle

(proactively recognized and provided 85% on the same) and lower restructured loans

(1.5% of overall loans) should be given due credit. If stress in the environment

continues, then slippages are bound to increase (though manageable considering

performance so far) and have been adequately factored. We assume credit cost at an

average of 70bp over FY13E-15E, compared to 40bp in FY12. However, it would be

offset by higher NIMs and RAM is expected to remain healthy at ~2.4% over FY12-15E.

Proporation of restructured loans remains low

Credit cost contained even as bank continues to shore up PCR

(%)

RAM at 5-year high…

Risk adjusted margin (%)

…and strong performance is expected to continue

Risk adjusted margin (%)

RAM improves sharply by 170bp, from its bottom, and at 5-year high. Strong asset quality performance coupled with structural improvement

in NIMs led to higher RAM

Source: Company, MOSL

17 January 2013

ICICI Bank

Gradual improvement in margins to continue

ALM in better shape



Structural improvement in liability profile (CASA ratio improved to 40%+ in FY12 v/s 26% in

FY08) and lower securitization losses drove NIMs from 2.2% in FY08 to 2.7% in FY12 and 3%

in 1HFY13 – domestic NIMs are much higher at 3.4% at end-2QFY13.

In the backdrop of ICICIBC winding up high yielding unsecured loans (now 1.3% of overall

loans, against ~9.8% in FY08) in favor of lower yielding corporate and secured loans, NIMs

performance becomes more commendable.

With higher CASA ratio at 40%+, well-matched ALM, no securitization losses and stable/

falling share of international loans with relatively higher margins than past, overall margins

are expected to improve in FY13E-15E. We expect FY13E NIMs to be higher at 3% and

improve further 3.2% over FY14E-15E.

Focus on core liabilities; CASA growth maintains pace on a higher base

Benefit of improved

liability profile will

continue

One of the key success factors to improve bank’s margins has been the drastic

improvement in liability profile. We believe improvement in CASA ratio has been a

key driver for margin improvement and has also negated the impact of falling

proportion of high yielding unsecured retail loan. With balance sheet growth resuming,

we believe further improvement in CASA ratio is unlikely; however, strong branch

expansion and technology upgradation would help ICICIBC to keep the CASA growth

pace in line with overall balance sheet growth.

Winding up of margin-dilutive unsecured loan book behind

With unsecured loan book at ~1.3% of the overall loan book, the pace of decline in

high-yielding loans is largely behind. Further, NPAs from unsecured retail loans also

led to higher accumulation of non-interest bearing assets in the balance sheet. As the

large write-offs have already taken place and asset quality is showing positive trend,

we believe it shall provide a cushion to margins.

Securitization losses to decline, leading to margins improvement of 5bps

In FY13E, securitization

losses are expected to be

negligible and thus

would further aid

margins expansion.

ICICIBC had aggressively securitized its retail loan portfolio over FY04-07 and with an

increase in delinquency ratio, securitized losses increased. Over FY08-11, the bank

booked losses on securitization of INR5b per year, which had a negative impact of

~15bp on margins; losses declined to INR2b in FY12 and the negative impact on margins

was 5bp. In FY13E, securitization losses are expected to be negligible and thus would

further aid margins expansion.

ALM issues resolved in international balance sheet

International margins to

improve further

International margins have already bounced back to 1.4% in 1HFY13, against an average

of ~85bp in FY11 and 1.25% in FY12. While further improvement would be a challenge,

if maintained at similar levels going forward, it would translate into 15bp improvement

in international NIMs over FY13 and provide a cushion to global margins.

17 January 2013

ICICI Bank

Higher margin domestic business to grow faster than international business

ICICIBC has identified secured retail loans and domestic corporate loans as the key

focus area for growth. Management is not very optimistic on growth in the

international portfolio. Growth in retail loans has already started showing traction

and domestic corporate growth remains strong driven by working capital requirements.

In our view, for every 5% change in the mix, reported margins shall show an

improvement of 10bp in overall margins.

Both domestic and international NIMs have

improved significantly (%)

Structurally moving to higher NIMs (%)

With an improvement in liability profile, CoF increase has been Margins at historically high level but expected

restricted, thus providing a cushion to margins (%)

to improve further (%)

Source: Company, MOSL

17 January 2013

ICICI Bank

CASA ratio improves 1.7x since FY08

Branch expansion and use of superior technology to keep CASA ratio healthy



Over FY08-12, while CASA CAGR was 15%, overall deposits were flat leading to higher CASA

ratio of 40%+ in FY12 as against 26% in FY08.

Strong branch additions over the past two years, increasing branch productivity and qualitative

balance sheet growth would keep CASA ratio strong at 39%+.

With ~15% of the branch network less than 18-24 months old (excluding the branches from

merger of BoR), incremental contribution from these branches are expected to increase

significantly as they ride through the cycle of maturity.

CASA growth remains healthy; CASA ratio improves 1.7x since FY08

Strong branch additions

over the past two years,

increasing branch

productivity and

qualitative balance sheet

growth led to strong

CASA ratio of 39%+

ICICIBC was in a consolidation mode over FY08-10 to realign its liability profile by

aggressively shedding short term bulk deposits and increasing thrust on CASA

mobilization. Over FY08-12, CASA CAGR was 15%, while overall deposits were flat and

provided fillip to CASA ratio which increased from 26% in FY08 to 40%+ in FY12. If we

see in isolation, term deposits at end-FY12 were still lower by ~19% than that in FY08,

which demonstrated the bank’s key focus to build a strong balance sheet rather than

chase growth. Strong branch additions over the past two years, increasing branch

productivity and qualitative balance sheet growth could keep CASA ratio strong at

39%+.

…provided strong boost to CASA ratio

Aggressive shedding of bulk deposits and thrust on CASA… (%)

Source: Company, MOSL

Impressive traction in SA deposits, 2x rise in branch network to provide fillip

We expect SA deposits

accretion to remain

healthy at a CAGR of

17% over FY12/15.

With a revamp in its deposit-taking strategy, ICICIBC started refocusing on the branch

banking model instead of agency model followed earlier. Coupled with it, an increase

in branch network by 2x+ over FY08 to 2,700+ helped it increase the proportion of

retail deposits in its book. SA deposits’ growth rebounded sharply to ~28% over FY10/

11, against 5% in FY09 (though partially led by the financial crisis). Consequently,

percentage of SA deposits to total deposits increased to 30%, against 16% in FY08. We

expect SA deposits accretion to remain healthy at a CAGR of 17% over FY12/15.

17 January 2013

ICICI Bank

SA deposit growth remains healthy

Sharp rise in proportion of SA deposits in overall deposits (%)

SA deposit growth lower than peers, but should be seen in the context of lower balance sheet growth as well (%)

(SA deposit growth)

(Balance sheet growth)

Source: Company, MOSL

Maturing branch network to aid CASA mobilization

Incremental contribution

from new branches are

expected to increase

significantly as they ride

through the cycle of

maturity

Due to a strong expansion in branch network, ICICIBC’s CASA per branch declined

from INR734m in FY07 to INR420m in FY12 and remained low compared to AXSB’

INR607m and HDFCB’s INR527m. We note that the high difference in CASA per branch

is due to CA per branch, while the difference in SA deposit per branch is lower, with

SA deposits per branch for ICICIBC at INR288m per branch as against INR326m for

HDFCB and INR343m for AXSB. With nearly ~15% of the branch network less than 18-

24 months old (excluding branches from merger of BoR), incremental contribution

from these branches are expected to increase significantly as they ride through the

cycle of maturity. Further, the bank has guided for balance sheet growth to be in line

with industry/marginally above industry average, which should help it sustain a CASA

ratio at ~40%.

Merger of Bank of Rajasthan (BoR):

ICICIBC merged BoR which had a branch network of 463 and total business of INR230b with

itself in August 2010. Over 60% of 463 BoR’s branches were in the state of Rajasthan which would provide ICICIBC a strong hold

in that region. Compared to ICICIBC, erstwhile BoR’s branches were grossly underutilized. BoR’s business per branch was

INR505m, compared to ICICIBC’s INR2.2b. With concentrated presence in northern India, ICICIBC would be able to benefit in the

longer time horizon.

17 January 2013

ICICI Bank

Strong branch expansion and moderation in business led to

decline in CASA per branch (INR m)

CASA per branch low against peers’

expect improvement (INR m)

Bank resorted to organic and inorganic expansion

Branch addition remain strong (addition during the year)

* HDFC merger with CBOP; # ICICIBC merger with Bank of Rajasthan

Source: Company, MOSL

17 January 2013

ICICI Bank

Loan growth revives – retail loan to gather momentum

Higher capitalization to ensure dilution-free growth



After a period of consolidation over FY08-10, the bank resumed on the growth path with a

loan CAGR of 18% over FY10/12. Initial phase of growth was driven by domestic corporate

loans (+36%); but in the past few quarters, retail segment too picked up with the entire

secured segment in retail showing signs of improvement.

Further, a drag on overall loans due to winding up of unsecured loans would be lower, with its

proportion to overall loans now being insignificant.

For FY12-15E, domestic loan growth is expected to post a CAGR of 20%+ and international loan

portfolio is expected to clock a CAGR of 15%. This would be supported by strong capitalization,

with CAR at 19% (of which Tier I is at 12.5%+). Further repatriation of capital from subsidiaries

and release of capital from insurance venture shall ensure dilution-free growth till FY16E.

Domestic loan CAGR to remain healthy at 20%+ over FY12-15E

The near term loan

growth driver would be

corporate loans however

an increasing momentum

in all segments of

secured retail portfolio is

positive

Post consolidation over FY08-10, ICICIBC’s trend on the growth path was led by a

strong growth in corporate segment, which reported a CAGR of ~36% over FY10-12

compared to overall loan growth of 18%. The other key drivers for growth were SME

(36%+, albeit on a lower base) and CV loans (higher share of bought portfolio 19%+).

While the near term driver would continue to be corporate loans (working capital

loans and disbursements from past sanctions), increasing momentum in all segments

of secured retail portfolio is positive. We expect domestic loan CAGR to be at 20%+

over FY12-15E. Growth in international segment is likely to be opportunistic and we

factor 5% growth in FY13E and to be largely in line with overall growth for FY14E/15E.

Loan growth improves, expect to be in line with industry average Expect share of retail loans to stabilize (%)

Post consolidation, ICICIBC resumed on the growth path led by a growth in corporate segment

Source: Company, MOSL

Decline in share of retail loans to overall loans likely to be arrested

Retail loans to grow 17-

18% over FY12/15, against

5% CAGR over FY10-12

17 January 2013

Led by higher repayments/writeoffs, retail loans declined by 15% CAGR over FY09-12

and at end-2QFY13 it formed ~34% of the overall loans, against 58% in FY08. Within

the retail segment, unsecured retail loan registered the sharpest fall of 40%+ over

FY09-12. However, in the past three quarters, loan book has stabilized indicating the

ICICI Bank

negative drag of it on overall loans seems to be limited in the future. Within retail,

growth in housing loan and auto/CV loan resumed to ~15% YoY in 1HFY13 (against a

decline of ~33% over FY08-10). We expect retail loans to grow 17-18% over FY12/15,

against 5% CAGR over FY10-12.

Growth in retail segment moderates (YoY, %)

Decline in unsecured personal loan has been arrested (%)

Drag on retail growth due to unsecured retail proportion behind, while housing and auto loan growth has improved in YTDFY12. With a

reversal in interest rate cycle and management focus, expect it to improve further

Source: Company, MOSL

17 January 2013

ICICI Bank

Healthy core profitability; RoA's improved decisively

Valuations at LPA; will evolve as RoE's improve over next two years



Structural drivers for strong core operations (1) margin improvement (2) stable cost to average

assets and (3) healthy asset quality performance (though factored higher credit cost) should

enable bank to deliver core PBT of 2% - highest in last decade.

Fee income growth though is expected to improve, is conservatively factored in at lower than

balance sheet growth (CAGR of 13% v/s balance sheet CAGR of 17%), leading to negative carry

on RoA's.

RoA's have improved decisively and with increasing leverage, core RoE to improve to 17%+ by

FY15E. Further, with stock trading at LPA, we expect valuations to evolve as growth visibility

improves and RoE's increase.

Structural improvements to aid core operating profit; NIMs expected to

remain healthy, to drive core operating profit

In our view, structural drivers for strong operations are in place and the bank would

maintain core operating profit at 190bp+ over FY13E-15E. Though expected

improvement in NIMs and stable credit cost shall drive core operating profit, continued

pressure in fee income would negate the benefit to some extent. Further cushion to

RoA would be provided by improved contribution from non-core income (trading

gains and dividend from subs), which is expected to improve from just 18bp in FY12 to

30bp+ by FY15E.

Core PBT (as a % of average assets) to remain healthy

Despite moderation in

risk adjusted core

income, strong control

on opex kept core

profitability healthy over

FY08-10. Further increase

was led by strong

improvement in RAM

Source: Company, MOSL

Excess flab already shed; fee income growth to improve and its drag on

RoA to reduce

Factoring in fee income

growth of 18% in FY14/15 ,

however with recovery in

macro-economic

environement, corporate

fees could provide

upside

17 January 2013

Commendable performance over cost helped the bank absorb impact of lower RAM

and muted fee income growth, thus keeping core-PBT largely stable at 90bp over

FY08-10. However, in our view, ICICIBC has utilized the benefit of cost reduction and

it is unlikely to drive RoA higher. With increasing branch presence, growing share of

retail business and higher employee base, we assume operating expense to register

17% CAGR over FY12-15E. However, cost to average assets ratio is expected to remain

stable at ~1.8% over FY13E/15E.

ICICI Bank

Fee income to average assets, cost to average assets ratios expected to remain stable

ICICIBC has utilized the

benefit of cost reduction

and it is unlikely to drive

RoA higher

Source: Company, MOSL

Valuations will evolve as RoE's improve over next two years

RoA's have improved

decisively and increasing

leverage would be a key

for RoE improvement

While RoA's has improved decisively to 1.5%+, lower leverage restricted improvement

in RoE. The bank has a CAR of 18.3%, with Tier I at 12.8%, which implies it is currently

under-leveraged (core) at 9.5x, compared to 11.x for HDFCB and 12.6x for AXSB. Going

forward, balance sheet size is expected to post a CAGR of 16%+ over FY12/15E and we

expect core leverage to increase to 11x. Increasing leverage would drive RoE's higher

to 17%+. Further, with ICICIBC trading at near LPA BV multiple, we expect valuations

will evolve as bank continue to deliver higher RoE's. Maintain Buy with a TP of 1,400.

ICICI Bank: SOTP FY15E

Total

Value

INR b

1,334

Total Value per

Value

USD b

INR

24.3

1,157

% of

Total

Value Rationale

82.7 2x FY15E BV ex Investment in key ventures;

Implied 12.4x core EPS

9.8

3.2

2.1

2.0

1.2

0.9

1.2

0.6

21.6

17.3

100

Apprisal Value; 74% Economic stake

1x FY15E BV

2x FY15E BV

Valued at 4% of Total AUM exp in FY15

12x FY15E PAT

1x FY15 Networth

10% FY15E AUMs

1x FY15 Networth

ICICI Bank

Key Ventures

ICICI Pru Life Insurance

ICICI Bank Canada (100% Subsidiary)

ICICI Bank UK (100% Subsidiary)

ICICI Home Finance (100% Subsidiary)

ICICI Pru Asset Management (51% stake)

ICICI Securities

ICICI Lombard General Insurance (74% stake)

ICICI Ventures

ICICI Securities PD

Total Value of Ventures

Less: 20% holding Discount

Value of Key Ventures

Target Price Post 20% Holding Co. Disc.

Current Value

Upside - %

Target Price w/o 20% Holding Co. Disc.

CMP (INR)

Upside - %

159

348

278

1,612

1,341

20.3

1,682

1,341

25.4

2.9

0.9

0.6

0.3

0.2

6.3

1.3

5.1

29.4

24.5

20.3

30.7

24.5

25.4

138

302

241

1,399

1,163

20.3

1,459

1,163

25.4

Source: MOSL

17 January 2013

ICICI Bank

RoA improvement to be driven by core operating performance (%)

Y/E March

Net Interest Income

Fee income

Core Operating Income

Operating Expenses

Employee cost

Other operating expenses

Core operating Profits

Non Core Other Income

Operating Profits

NPA provisions

Other Provisions

Provisions

PBT

Tax

RoA

FY04

1.92

1.11

3.03

2.42

0.47

1.95

0.61

1.53

2.14

0.40

0.10

0.50

1.64

0.23

1.41

FY05

2.13

1.50

3.64

2.51

0.50

2.01

1.13

0.89

2.02

-0.08

0.38

0.29

1.73

0.36

1.37

FY06

1.86

1.65

3.51

2.39

0.52

1.87

1.12

0.73

1.86

0.38

0.00

0.38

1.48

0.27

1.21

FY07

1.89

1.68

3.57

2.24

0.54

1.70

1.33

0.64

1.97

0.48

0.27

0.75

1.22

0.18

1.04

FY08

1.96

1.78

3.74

2.19

0.56

1.63

1.55

0.59

2.14

0.68

0.10

0.78

1.36

0.24

1.12

FY09

2.15

1.67

3.82

1.81

0.51

1.30

2.01

0.28

2.29

0.96

0.01

0.98

1.31

0.35

0.96

FY10

2.19

1.52

3.71

1.58

0.52

1.06

2.13

0.49

2.62

1.17

0.01

1.18

1.44

0.36

1.08

FY11

2.34

1.67

4.01

1.72

0.73

0.99

2.29

0.06

2.35

0.51

0.08

0.59

1.76

0.42

1.34

FY12

2.44

1.52

3.96

1.78

0.80

0.99

2.18

0.18

2.36

0.23

0.13

0.36

2.00

0.53

1.47

FY13E

2.75

1.39

4.14

1.82

0.83

1.00

2.32

0.30

2.62

0.36

0.04

0.40

2.22

0.60

1.62

FY14E

2.90

1.42

4.32

1.84

0.84

1.00

2.48

0.33

2.80

0.38

0.06

0.43

2.37

0.64

1.73

FY15E

2.91

1.40

4.32

1.81

0.84

0.97

2.51

0.31

2.82

0.38

0.06

0.44

2.37

0.63

1.74

DuPont Comparison with peers (%)

Axis Bank

Average

FY04-07

FY08-12

Net Interest Income

2.4

Fee income

1.2

Fee to core Income

34.1

Core operating Income

3.6

Operating Expenses

1.9

Cost to Core Income

53.3

Employee cost

0.6

Other operating expenses 1.3

Core Operating Profits

1.7

Trading and others

0.6

Operating Income

2.2

Provisions

0.5

NPA provisions

0.4

Other Provisions

0.1

PBT

1.7

Tax

0.6

Tax Rate

34.2

RoA

1.1

3.0

1.8

37.4

4.8

2.3

47.8

0.8

1.5

2.5

0.4

2.9

0.6

0.5

0.1

2.2

0.8

34.2

1.5

HDFC Bank

Average

FY04-07

FY08-12

3.7

1.6

30.4

5.3

2.5

48.2

0.7

1.8

2.7

0.0

2.7

0.7

0.6

0.1

2.0

0.6

30.5

1.4

4.3

1.8

29.3

6.1

3.1

50.3

1.2

1.9

3.1

0.1

3.2

1.0

0.7

0.3

2.2

0.7

31.5

1.5

ICICI Bank

Average

FY04-07

FY08-12

2.0

1.5

43.2

3.4

2.4

69.6

0.5

1.9

1.0

0.9

2.0

0.5

0.3

0.2

1.5

0.3

17.0

1.3

FY13-15E

3.2

1.8

36.1

4.9

2.3

45.5

0.8

1.4

2.7

0.3

3.0

0.5

0.1

2.5

0.8

32.5

1.7

FY13-15E

4.1

1.7

29.3

5.8

2.7

45.4

1.1

1.6

3.2

0.1

3.3

0.5

0.4

0.1

2.8

0.9

31.6

1.9

FY13-15E

2.2

2.9

1.6

1.4

42.4

33.0

3.8

4.3

1.8

47.2

42.9

0.6

0.8

1.2

1.0

2.0

2.4

0.3

2.4

2.7

0.8

0.4

0.7

0.4

0.1

1.6

2.3

0.4

0.6

24.1

26.8

1.2

1.7

Source: Company, MOSL

Comments 1): NII to average assets has improved, but remains low compared to peers due to higher share of international

portfolio. Domestic margins are at ~3.4%.

Comments 2): Fee income contribution to RoA lower than peers. Faster than expected economic recovery, leverage on strong

corporate relationship and improving growth in retail loan would gradually improve fee income contribution

Comments 3): Strong control on opex resulting in best-in-class cost to average asset ratio

Comments 4): Strong asset quality performance over past two years is commendable

Comments 5): RoAs has improved decisively and is now best in the class

17 January 2013

ICICI Bank

ICICIBC: One-year forward PBV and RoE

ICICIBC: One-year forward PE and RoA

ICICIBC: One-year forward PBV

ICICIBC: One-year forward PE

17 January 2013

ICICI Bank

Financials and Valuation

Income Statement

NII CAGR of 23%+ over FY13-

15E on back of higher margins

and improving loan growth

Fee income growth to improve

Y/E March

2010

Interest Income

257,069

Interest Expended

175,926

Net Interest Income

81,144

Change (%)

-3.0

Other Income

74,777

Net Income

155,920

Change (%)

-2.4

Operating Exp.

58,598

Operating Profits

97,322

Change (%)

9.0

Provisions & Cont.

43,869

PBT

53,453

Tax

13,203

Tax Rate (%)

24.7

PAT

40,250

Change (%)

7.1

Dividend (Including Tax)

15,020

Core PPP*

85,512

Change (%)

0.8

*Core PPP is (NII+Fee income-Opex)

2011

259,741

169,572

90,169

11.1

66,479

156,648

0.5

66,172

90,475

-7.0

22,868

67,607

16,093

23.8

51,514

28.0

18,170

92,625

8.3

2012

335,427

228,085

107,342

19.0

75,028

182,369

16.4

78,504

103,865

14.8

15,830

88,034

23,382

26.6

64,653

25.5

21,228

103,995

12.3

2013E

404,434

266,458

137,977

28.5

84,902

222,879

22.2

91,484

131,395

26.5

20,008

111,387

30,075

27.0

81,313

25.8

28,541

125,895

21.1

2014E

456,258

288,261

167,997

21.8

101,331

269,328

20.8

106,877

162,450

23.6

25,194

137,257

37,059

27.0

100,197

23.2

35,169

154,950

23.1

(INR Million)

2015E

544,608

343,127

201,481

19.9

118,395

319,876

18.8

125,093

194,784

19.9

30,732

164,052

43,474

26.5

120,578

20.3

42,323

187,284

20.9

On a higher base, PAT CAGR of

23% over FY12-15

Balance Sheet

Y/E March

Share Capital

Equity Share Capital

Preference Capital

Reserves & Surplus

Net Worth

Of which Equity Net Worth

Deposits

Change (%)

Of which CASA Deposits

Change (%)

Borrowings

Other Liabilities & Prov.

Total Liabilities

Current Assets

Investments

Change (%)

Loans

Change (%)

Net Fixed Assets

Other Assets

Total Assets

2010

14,649

11,149

3,500

505,035

519,684

516,184

2,020,166

-7.5

842,158

34.4

939,136

155,012

3,633,997

388,737

1,208,928

17.3

1,812,056

-17.0

32,127

192,149

3,633,997

94,807

38,411

5.1

2.1

59.5

2011

15,018

11,518

3,500

539,391

554,409

550,909

2,256,021

11.7

1,016,465

20.7

1,092,043

159,864

4,062,337

340,901

1,346,860

11.4

2,163,659

19.4

47,443

163,475

4,062,337

100,343

24,074

4.5

1.1

76.0

2012

15,028

11,528

3,500

592,525

607,552

604,052

2,555,000

13.3

1,110,194

9.2

1,398,149

175,770

4,736,471

362,293

1,595,600

18.5

2,537,277

17.3

46,147

195,154

4,736,471

94,753

18,608

3.6

0.7

80.4

2013E

15,028

11,528

3,500

645,297

660,324

656,824

2,980,269

16.6

1,240,225

11.7

1,461,891

192,684

5,295,169

393,353

1,715,270

7.5

2,945,821

16.1

45,571

195,154

5,295,169

101,527

19,526

3.4

0.7

80.8

(INR Million)

2014E

15,028

11,528

3,500

710,325

725,352

721,852

3,595,791

20.7

1,451,924

17.1

1,742,093

230,538

6,293,773

484,987

1,972,561

15.0

3,555,546

20.7

46,495

234,185

6,293,773

115,520

24,599

3.2

0.7

78.7

2015E

15,028

11,528

3,500

788,580

803,608

800,108

4,394,202

22.2

1,699,998

17.1

2,058,712

276,151

7,532,673

599,633

2,268,445

15.0

4,334,655

21.9

48,918

281,022

7,532,673

Strong capitalization to ensure

dilution free growth

SA growth to remain healthy at

17%+ over FY13/15 and CASA

ratio to be strong at 39%+

Loan growth to improve led by

healthy growth in domestic

operations

Asset Quality

GNPA (INR m)

NNPA (INR m)

GNPA Ratio

NNPA Ratio

PCR (Excl Technical write off)

E: MOSL Estimates

17 January 2013

(%)

135,970

31,768

3.1

0.7

76.6

ICICI Bank

Financials and Valuation

Ratios

Y/E March

Spreads Analysis (%)

Avg. Yield - Earning Assets

Avg. Yield on loans

Avg. Yield on Investments

Avg. Cost-Int. Bear. Liab.

Avg. Cost of Deposits

Interest Spread

Net Interest Margin

Profitability Ratios (%)

RoE

Adjusted RoE

RoA

Int. Expended/Int.Earned

Other Inc./Net Income

Efficiency Ratios (%)

Op. Exps./Net Income*

Empl. Cost/Op. Exps.

Busi. per Empl. (INR m)

NP per Empl. (INR lac)

* ex treasury

Asset-Liability Profile (%)

Loan/Deposit Ratio

CASA Ratio %

Invest./Deposit Ratio

G-Sec/Invest. Ratio

CAR (BASEL II)

Tier 1

2010

7.9

8.7

5.8

5.2

5.5

2.7

2.5

2011

7.7

8.3

6.2

4.8

4.7

2.9

2.7

2012

8.5

9.4

6.6

5.7

5.9

2.8

2.7

2013E

8.9

10.1

6.7

5.8

6.3

3.1

3.0

2014E

8.6

9.6

6.7

5.4

5.9

3.2

2015E

8.6

9.6

6.7

5.6

5.8

3.0

3.2

Gradual improvement in

margin to continue, domestic

margin at historical high of

3.4%+ in 2QFY13

RoA's has improved decisively

to 1.6%+, increasing leverage

to boost RoE's to 17%+

8.0

9.6

1.1

68.4

48.0

9.7

11.5

1.3

65.3

42.4

11.3

12.8

1.5

68.0

41.1

13.1

14.6

1.6

65.9

38.1

14.7

16.1

1.7

63.2

37.6

16.0

17.2

1.7

63.0

37.0

Cost to income ratio expected

to decline gradually

40.7

32.9

99.8

9.8

41.7

42.6

72.4

9.0

43.0

44.8

81.6

11.1

42.1

45.3

88.9

13.1

40.8

45.8

98.8

15.1

40.0

46.2

112.8

17.1

Adequately capitalized till FY16

89.7

41.7

59.8

56.6

19.4

14.4

95.9

45.1

59.7

47.6

19.5

13.2

99.3

43.5

62.5

54.5

18.5

12.7

98.8

41.6

57.6

53.3

17.6

12.2

98.9

40.4

54.9

57.6

15.8

11.2

98.6

38.7

51.6

58.3

14.2

10.3

Valuation

Book Value (INR)

463.0

BV Growth (%)

5.1

Price-BV (x)

ABV (for Subsidaries) (INR)

353.6

ABV Growth (%)

6.6

Price-ABV (x)

ABV (for Subs Invst & NPA) (INR) 329.5

Adjusted Price-ABV (x)

EPS (INR)

36.1

EPS Growth (%)

6.9

Price-Earnings (x)

Adj. Price-Earnings (x)

Dividend Per Share (INR)

12.0

Dividend Yield (%)

E: MOSL Estimates

478.7

3.4

370.6

4.8

356.0

44.7

23.9

516.6

7.9

2.3

408.6

10.2

2.4

397.3

2.5

56.1

25.4

20.7

17.5

16.5

1.4

562.4

8.9

2.1

454.3

11.2

2.1

442.5

2.2

70.5

25.8

16.5

13.7

21.2

1.8

618.8

10.0

1.9

510.8

12.4

1.9

495.8

1.9

86.9

23.2

13.4

10.9

26.1

2.2

686.7

11.0

1.7

578.6

13.3

1.6

559.3

1.6

104.6

20.3

11.1

9.4

31.4

2.7

Trading at near LPA P/BV, with

evolving RoE's over next two

years valuations should

improve; Top Pick

14.0

17 January 2013

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