ICICI Bank – Continues Its Robust Performance

ICICI Bank recently posted its Sept 2012 quarter numbers, which were above the street’s expectations. The standalone Net Profit of the bank grew by a stupendous 30% to Rs 1956 crore on a YoY basis. In the past, we at Dalal Street Investment Journal, we have been bullish on the counter, and now too, we expect the bank's share price to move northwards going ahead. The bank’s key financial parameters are as follows:

ICICI Bank saw a huge expansion in its Net Interest Margin (NIM), which increased by 39 basis points (bps) to 3% on a YoY basis from 2.6% in Q2FY12. This increase was due to a 61 bps YoY rise in the yield on funds to 10.1% versus the 12 bps YoY rise in the cost of funds to 6.5%. One should note that even in an uncertain environment, the bank has seen very good expansion in its margins, which is commendable. As on Sept 30, 2012, its Capital Adequacy Ratio (CAR) stood at 18.28% with the Tier I CAR at 12.83%, which is way above the RBI's minimum requirement.

Further, the bank faced some headwinds on the asset quality front. On a sequential basis, its Gross NPAs remained stable at 3.54% and the Net NPAs increased by 7 bps to 0.78%. However, on a YoY basis, both have contracted by 60 and 15 bps respectively. One should note that in the Jun 2012 quarter results, ICICI Bank was the only firm on the BSE Bankex whose Net NPAs saw a downward move. Further, as on Sept 30, 2012, its Provision Coverage Ratio remained almost stable at 79%.

For the September quarter, its Net Interest Income (NII) increased by 35% to Rs 3371 crore. Despite the rise in Provisions by 60% to Rs 508 crore, the bank posted a healthy bottomline growth. The Cost to Income ratio of the bank also decreased substantially by 350 bps to 40.9%, which hints at efficient operations.

As on Sept 30, 2012, the total deposits with the bank increased by 15% to Rs 281438 while the advances grew by 17.57% to Rs 275076 on a YoY basis. The business growth is almost in line with the RBI’s estimates of deposit growth of 15% and advances growth of 17% for FY2013.

ICICI Bank’s consolidated Profit After Tax (PAT) increased 20% to Rs 2390 crore. As regards its subsidiaries, the PAT for ICICI Prudential Life Insurance stood at Rs 396 crore compared to Rs 350 crore in the similar period last year and ICICI Lombard General Insurance’s PAT was Rs 101 crore against Rs 56 crore last year.

As of Sept 30, 2012, the bank’s branch network stood at 2772 and its ATM network stood at 10006. On the valuations front, it is currently trading at a trailing Price to Earnings multiple of 16.68x and a Price to Book Value of around 1.91x, and we believe that it is fairly priced.

We continue to hold our bullish stance on the scrip, and would advise investors to buy the scrip in a staggered manner with a long-term view to garner better returns.