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1、,26.1,57,FlashnoteFIGCommercial BanksEquity IndiaOverweight,abcGlobal ResearchICICI Bank(ICICIBC IN),Target price(INR)Share price(INR)Forecast dividend yield(%)Potential return(%),1344.001078.401.5,OW:2QFY13 what you hear is what you get ICBK has consistently met targets on the back of realisticguid
2、ance this year,unlike many PSU banks,Note:Potential return equals the percentage,difference between the current share price andthe target price,plus the forecast dividend yield,Clear indicators of improving domestic loan growth,firm,PerformanceAbsolute(%)Relative(%),1M1.20.5,3M18.95.5,12M23.714.0,ma
3、rgins and superior NPL management positions it well fora credit cycle turnaround,IndexRICBloomberg,BOMBAY SE SENSITIVE INDEXICBK.BOICICIBC IN,Reiterate OW with revised TP of INR 1,344 from INR1,257implying potential return of 26%,Market cap(USDm)Market cap(INRm)Free float(%),23,2081,243,462,2QFY13 e
4、arnings surprised marginally on the top line but magnified to an 8%surprise atthe bottom line given in line provisioning.The stock initially spiked but ultimately closed,26 October 2012Sachin Sheth*AnalystHSBC Securities&Capital Markets(India)Private Limited+91 22 2268 1224sachinshethhsbc.co.inTejas
5、 Mehta*AnalystHSBC Securities&Capital Markets(India)Private Limited+91 22 2268 1243tejasmehtahsbc.co.inTodd Dunivant*Head of Banks Research,Asia PacificThe Hongkong and Shanghai BankingCorporation Limited+852 2996.hkView HSBC Global Research at:http:/*Employed by a non-US affiliate ofHSBC Securities
6、(USA)Inc,and is notregistered/qualified pursuant to FINRAregulationsIssuer of HSBC Securities and Capitalreport:Markets(India)Private LimitedDisclaimer&DisclosuresThis report must be readwith the disclosures andthe analyst certifications inthe Disclosure appendix,and with the Disclaimer,which forms
7、part of it,marginally lower after a spate of poor PSU bank results were announced.Operating metrics:Loan growth was driven by domestic corporate loans(past projectapprovals and working capital credit)followed by retail loans(home and vehicle loans)where ICBK is clawing back share from a low base.Fun
8、ding costs flattened on the backof higher retail deposit component to help margins remain firm at 3%overall and rise to3.4%for domestic business with CASA remaining at a stable 41%.Fee momentum hasnaturally slowed given the slowing corporate/macro environment and remains a weak spotin the numbers.Ho
9、wever,slippages and credit costs remained on track despite a largemedia account slipping into NPL status resulting in earnings growth of 30%y/y,about 8%higher than our estimates.Tier 1 remained robust at 12.9%and ROA was 1.6%Earnings outlook:We fine-tune our numbers marginally and look for 23%CAGR i
10、nearnings up to FY15e driven by 17%loan growth this year and 20%for the subsequenttwo years,flattish margins after this years 22bps pickup,weak fee growth this year,stable cost-income ratio and credit costs remaining at 75bps this year and next.Valuations and target price:The stock trades at 14x PE
11、and 1.8x PB rolling forward 12months on an overall basis but at 12x and 1.5x on a parent-only basis,making it one of thecheapest private bank in our coverage universe,even after the 15%outperformance to theBankex YTD.We maintain our target multiples at 18x PE and 1.8x PB(October 2014base)inline with
12、 its 3-year average and believe investors will use the PB multiple onadjusted book values after writing off all unprovided NPLs to factor in the heightenedasset quality risks in the current weak environment,which represents a minor 2%adjustment for ICICI Bank.Hence,we set our 12-month target price a
13、t INR1,344(vs.INR1,257 earlier)implying a potential return of 26%.Retain OW rating.Stock catalyst islikely to be improving growth momentum along with stable asset quality;Key risks:(1)Slower than expected loan growth momentum;(2)spike in NPLs and credit costs,ICICI Bank(ICICIBC IN)Commercial Banks26
14、 October 2012Financials&valuation,abc,Year toP&L summary(INRm),3/2012a 3/2013e 3/2014e 3/2015e,Year toGrowth(YoY%),3/2012a,3/2013e,3/2014e,3/2015e,Net Interest IncomeNon-interest IncomeNet fees/commissionTrading profitsOtherTotal Operating incomeOperating expenseStaff costsOther oper expensePPOPProv
15、isionsBad debtOtherOther non-oper profit(loss)HSBC PBTExceptionalsProfit-before taxTaxationPATMinorities+pref dividendAttributable profitHSBC attributable profitBalance sheet summary(INRm)Total assetsCustomer loans(net)Investment assetsOther_assetsTotal LiabilitiesCustomer depositsDebt securities is
16、suedOther liabilitiesTotal capitalOrdinary equityMinorities+other capitalIEA(avg)IBL(avg),107,34275,02866,9413,3144,773182,36978,50435,15343,352103,86515,8919,9325,96087,973-87,97323,32164,653-64,65364,6534,736,4712,537,2771,595,600603,5944,128,9182,555,0001,398,149175,770607,552604,0293,5244,151,94
17、13,650,606,135,62583,74775,8502,5185,379219,37290,90540,15950,746128,46720,51915,1685,351107,948-107,94828,71479,234-79,23479,2345,495,3912,974,6221,824,921695,8474,831,4362,975,5171,622,989232,929663,956660,4323,5244,834,8124,275,827,162,45296,97488,3612,5186,095259,426103,50845,74457,765155,91824,
18、47218,4446,028131,445-131,44535,49095,955-95,95595,9556,540,7223,576,3052,149,957814,4595,806,3283,490,1721,897,295418,861734,394730,8703,5245,693,9254,992,986,197,452114,754105,3602,5186,875312,205122,11952,09070,029190,08627,04519,8907,156163,041-163,04144,021119,020-119,020119,0207,790,3984,300,1
19、712,536,221954,0056,965,1864,100,2672,216,736648,183825,212821,6883,5246,788,3455,852,235,Net interest incomeNon-interest incomeOperating expensePPOPProvisionsPBTPATCustomer loans(net)Total AssetsRWACustomer depositsRatios(%)NIMGross yieldCost of fundsSpreadNPL/gross loansCredit costCoverageNPL/RWAP
20、rovision/RWANet write-off/RWANPL/NTENet loans/total assetsRWA/total assetsLoans/depositsAvg IEA/avg total assetsAvg IBL/avg total liabCost/incomeNon-int income/total incomeROAA(including goodwill)ROAE(including goodwill)Return on avg tier 1Leverage(x),19.012.918.614.8(30.6)30.225.517.316.616.713.32.
21、598.086.251.833.60.480.42.41.9-15.753.684.299.394.483.043.041.11.4711.213.57.6,26.311.615.823.729.122.722.617.216.045.116.52.818.406.322.073.50.678.01.81.4-16.154.1105.3100.094.583.641.438.21.5512.513.48.1,19.815.813.921.419.321.821.120.219.018.217.32.858.226.122.103.20.679.01.71.416.154.7104.5102.5
22、94.683.039.937.41.5913.813.58.7,21.518.318.021.910.524.024.020.219.118.317.52.918.005.902.092.90.580.01.61.315.755.2103.8104.994.781.739.136.81.6615.328.49.2,Capital adequacy(%),Valuation data,RWA(INRm)Core tier 1Total tier 1Total capitalPer share data(INR),3,985,858 5,784,505 6,837,690 8,088,88112.
23、7%11.4%10.7%10.2%12.7%11.7%10.9%10.4%18.5%17.9%16.2%14.8%,PE(diluted EPS)P/PPOPP/BVPSP/NTEDividend yield(x)P/Deposit,19.212.02.12.11.50.5,15.79.71.91.91.60.4,13.08.01.71.71.80.4,10.46.51.51.51.90.3,EPS reported(fully diluted),56.1,68.7,83.2,103.2,P/Asset,0.3,0.2,0.2,0.2,HSBC EPS(fully diluted)DPS,56
24、.116.5,68.717.0,83.219.0,103.221.0,Note:p=provisional,NAVNAV(including goodwill)ROAA deconstructionNet interest incomeTotal interest incomeTotal interest expenseNet fees&commissionOther incomeOperating incomeOperating expenses,524.0524.02.447.625.181.520.184.151.78,572.9572.92.657.945.291.480.154.29
25、1.78,634.0634.02.707.775.071.470.144.311.72,712.8712.82.767.584.821.470.134.361.70,Price relative127511751075975875775675575,127511751075975875775675575,Staff costs,0.80,0.78,0.76,0.73,2010,2011,2012,2013,Other oper exp,0.99,0.99,0.96,0.98,ICICI Bank,Rel to BOMBAY SE SENSITIVE INDEX,PPOPProvisionsNo
26、n-op itemsPBTTaxationPAT,2.360.36-2.000.531.47,2.510.40-2.110.561.55,2.590.41-2.180.591.59,2.650.38-2.280.611.66,Source:HSBCNote:price at close of 26 October 2012,2,2Q06,4Q06,2Q07,4Q07,2Q08,4Q08,2Q09,4Q09,2Q10,4Q10,2Q11,4Q11,2Q12,4Q12,2Q13,4Q06,2Q07,4Q07,2Q08,4Q08,2Q09,4Q09,2Q10,4Q10,2Q11,4Q11,2Q12,
27、4Q12,2Q13,4Q07,4Q09,2Q10,4Q10,2Q12,4Q12,2Q13,2Q08,4Q08,2Q09,2Q11,4Q11,2Q06,4Q06,2Q07,4Q07,2Q08,4Q08,2Q09,4Q09,2Q10,4Q10,2Q11,4Q11,2Q12,4Q12,2Q13,4Q09,1Q10,2Q10,3Q10,4Q10,1Q11,2Q11,3Q11,4Q11,1Q12,2Q12,3Q12,4Q12,1Q13,2Q13,1Q10,2Q10,3Q10,4Q10,1Q11,2Q11,3Q11,4Q11,1Q12,2Q12,3Q12,4Q12,1Q13,2Q13,ICICI Bank
28、(ICICIBC IN)Commercial Banks26 October 2012ICICI Bank:CASA mix,Margins,ICICI Bank:Segment-wise Loan growth(Y/Y),abc,50%45%40%35%30%25%20%,3.1%2.9%2.7%2.5%2.3%2.1%1.9%,60%40%20%0%-20%-40%,Y/Y growth,Low cost deposit mix,Net Interest Margins(RHS),Retailw/sale international,w/sale domesticTotal,Source:
29、Company data,HSBCICICI Bank:Net interest margin details,Source:Company data,HSBCICICI Bank:Trends in NPLs,15%13%11%9%7%5%,3.5%3.0%2.5%2.0%1.5%1.0%0.5%0.0%,9%7%5%3%1%,Yld on earning assets(LHS)Spread(RHS)Source:Company data,HSBCICICI Bank:NPL provisioning2.5%2.0%1.5%1.0%0.5%,Cost of funds(LHS)NIM(rep
30、orted)(RHS),Gross NPL ratioothersSource:Company data,HSBCICICI Bank:Restructured Loans3.0%2.5%2.0%1.5%1.0%0.5%0.0%,of w hich Retail,0.0%,Adjusted net llp/loansSource:Company data,HSBC,Gross LLP/Avg Loans,Restructured Loans/Total LoansSource:Company data,HSBC,3,2Q06,4Q06,2Q07,4Q07,2Q08,4Q08,2Q09,4Q09
31、,2Q10,4Q10,2Q11,4Q11,2Q12,4Q12,2Q13,2Q06,4Q06,2Q07,4Q07,2Q08,4Q08,2Q09,4Q09,2Q10,4Q10,2Q11,4Q11,2Q12,4Q12,2Q13,1Q08,3Q08,3Q10,1Q11,1Q06,3Q06,1Q07,3Q07,1Q09,3Q09,1Q10,3Q11,1Q12,3Q12,1Q13,2Q11,2Q13,4Q09,2Q10,4Q10,4Q11,2Q12,Oct-07,Oct-09,4Q12,Oct-11,Oct-99,Oct-05,Oct-11,Oct-97,Oct-01,Oct-03,Oct-07,Oct-
32、09,Oct-99,Oct-05,Oct-97,Oct-01,Oct-03,ICICI Bank(ICICIBC IN)Commercial Banks26 October 2012ICICI Bank:Core fees/Core revenues55%50%45%40%35%30%,ICICI Bank:Cost Income Ratio70%60%50%40%30%,abc,Proportion of core fees to core income,Cost Income Ratio,Core Cost Income Ratio,Source:Company data,HSBCICIC
33、I Bank:Retail Loans growth momentum250,Source:Company data,HSBCICICI Bank:Domestic and International NIMs400%,200150100500,Total retail DisbursementsYoY Grow th in Retail book(RHS),50%0%-50%-100%YoY Grow th in Retail disb(RHS),300%200%100%0%,Reported NIMs-overallInternational NIMs(assumed at 1%)Dome
34、stic NIMs,Source:Company data,HSBC estimates;*disbursement data are HSBC estimatesICICI Bank:PE-12mth rolling forward40 x35x30 x25x20 x15x10 x5x0 x,Source:Company data,HSBCICICI Bank:PB-12mth rolling forward4.5x4.0 x3.5x3.0 x2.5x2.0 x1.5x1.0 x0.5x0.0 x,Rolling P/ESource:Bloomberg,Company data,HSBC,A
35、v g 5y r,Rolling PBSource:Bloomberg,Company data,HSBC,Av erage 5 year,4,-,ICICI Bank(ICICIBC IN)Commercial Banks26 October 2012ICICI Bank:2Q FY13 results summary,abc,(INRbn),Q2FY13,y-o-y%,q-o-q%,Income statement,Interest incomeInterest on AdvancesIncome on InvestmentsInterest on Balances with RBI&ot
36、her inter bank fundsOther interestInterest expenseNet interest incomeOther income-ex treasuryTreasury gainTotal other incomeOperating incomeCore operating incomeOperating expenseEmployee expensesOperating profitCore operating profitLoan loss provisionsOther provisionsTotal provisionsPre tax profitTa
37、xNet profitBalance sheetAdvancesDepositsCASA mixGross NPLsNet NPLsTotal AssetsAverage Total AssetsRatiosLDRIncremental LDRMargins(reported)NII/Avg DepositsCost-income ratioCore cost income ratioProvisions/Avg loansGross NPL ratioNet NPL ratioCoverage ratioCoverage ratio(RBI guidelines)Tier 1 ratioTo
38、tal CAREffective tax rateTax/Operating ProfitROA,100.2668.4927.451.492.8466.5533.7118.711.7220.4354.1452.4222.219.6631.9330.215.030.055.0826.857.2919.56Q2FY132,7512,81440.7%100.3621.344,9714,903Q2FY1397.7113.13.004.9141.042.40.743.540.7878.778.712.918.327.222.81.59,23%27%17%29%-10%18%35%3%315%17%28%
39、21%17%15%36%24%68%-71%59%32%37%30%y-o-y%18%15%(143)bps0%-2%13%15%y-o-y%pnts2.3(67.6)0.390.70(3.5)(1.4)0.2(0.6)(0.2)0.50.5(0.2)(0.7)1.00.250.2,5%6%2%20%8%5%6%-2%919%9%7%3%5%-2%8%2%29%-93%9%8%9%8%q-o-q%2%5%7 bps2%12%3%2%q-o-q%pnts(2.5)(15.5)(0.01)0.03(0.8)0.70.00.1(1.9)(1.9)0.2(0.3)0.20.170.0,Source:C
40、ompany data,HSBC5,-,ICICI Bank(ICICIBC IN)Commercial Banks26 October 2012ICICI Bank:Earnings outlook,abc,(INRm),FY13e,y-o-y%,FY14e,y-o-y%,FY15e,y-o-y%,Income statement,Interest IncomeInterest ExpensesNet Interest Income(NII)Total Non-Interest IncomeTotal IncomeOperating ExpensesPre-provisioning Prof
41、itsProvisions for NPAsTotal ProvisionsPBTTaxPAT,406,067270,442135,625219,37290,905128,467125,94815,16820,519107,94828,71479,234,21.1%18.6%26.3%20.3%15.8%23.7%25.3%52.7%29.1%22.7%23.1%22.6%,467,783305,331162,452259,426103,508155,918153,39918,44424,472131,44535,49095,955,15.2%12.9%19.8%18.3%13.9%21.4%
42、21.8%21.6%19.3%21.8%23.6%21.1%,542,987345,535197,452312,205122,119190,086187,56819,89027,045163,04144,021119,020,16.1%13.2%21.5%20.3%18.0%21.9%22.3%7.8%10.5%24.0%24.0%24.0%,Balance Sheet,y-o-y%,y-o-y%,y-o-y%,DepositsNet AdvancesTotal AssetsBPSEPS,2,975,5172,974,6225,495,391572.9168.73,16.5%17.2%16.0
43、%9.3%22.5%,3,490,1723,576,3056,540,722634.0183.24,17.3%20.2%19.0%10.7%21.1%,4,100,2674,300,1717,790,398712.80103.25,17.5%20.2%19.1%12.4%24.0%,Ratios,y-o-y%pnts,y-o-y%pnts,y-o-y%pnts,Net Interest MarginROAROETax rateCost IncomeCore Cost Income,2.8%1.5%12.5%26.6%41.4%41.9%,0.220.081.340.09(1.61)(1.92)
44、,2.9%1.6%13.8%27.0%39.9%40.3%,0.050.051.260.40(1.54)(1.63),2.9%1.7%15.3%27.0%39.1%39.4%,0.060.071.54(0.78)(0.86),Source:Company data,HSBC estimates6,62,3,ICICI Bank(ICICIBC IN)Commercial Banks26 October 2012Valuation and risksOverweight,Target Price INR1,344We continue to value ICICI Bank using a we
45、ighted average combination of PE,PB and economic profitmodel(EPM)methodologies.We assign a 50%,20%,and 30%weight each to the PE,PB,and EPMcomponents,respectively.The three-stage EPM uses explicit forecasts until FY15e,followed by 10 yearsof semi-explicit forecasts.The final stage of 12 years(fade pe
46、riod)assumes convergence of ROE andCOE.EPM is based on the assumptions in the following table:ICICI:EPM assumptionsSemi-explicit forecasts for 10 yrs,abc,Loan CAGRDividend payoutFade period of 12 yrsRisk free rateBetaEquity risk premiumCost of Equity,14%30%8%1.06%14%,New,Old,EPM value of BankEPM val
47、ue of SubsidiariesTotal EPM value(including subsidiaries)Source:HSBC estimatesICICI:Sum-of-parts valuation(INRm),690160851,661160821,Stake,Value to ICBK,Value/share Remarks,ICICI Prudential Life InsuranceICICI Lombard General Insurance,74%74%,71,7063,648,15x new business multiple,14%NBAP margins15x
48、earnings,ICICI Prudential AMCOther Domestic subsidiariesInternational subsidiaries,51%100%100%,17,31170,33021,968,156119,4%of AUMOther subs1x BV,EPM value of Subsidiaries,160,Source:Company data,HSBC estimatesUnder our research model,for stocks without a volatility indicator,the Neutral band is 5 pe
49、rcentagepoints above and below the hurdle rate for Indian stocks of 10%.Our target price implies a potentialreturn of 26%,which is above the Neutral band of our model;therefore,we are reiterating our OW ratingon the stock.Potential return equals the percentage difference between the current share pr
50、ice and thetarget price,including the forecast dividend yield when indicated.ICICI:Valuations and risks summary(INR),PEmultiple,Weight 50%PE-based TP,PBmultiple,Weight 20%PB-based TP,Weight 30%DCF value,Weighted Downside risksTarget Price,New,18.0 x,1,708,1.8x,1,171,851,1,344 Slower than expected lo
