566 cmp fy22e p/adj bv 2 - ominvestments.com bank_final.pdfvaluation methodology to value the bank....

ICICI BANK BUY

- 1 - Monday, 1st July 2019

This document is for private circulation, and must be read in conjunction with the disclaimer on the last page.

Key Financials (Rs in cr)

ROE ROA P/E P/ Adj.

(%) (%) (x) BV(x)

2018 23,025.8 17,419.6 6,777.4 10.5 142.4 6.6 0.8 41.7 3.1

2019 27,015.1 14,512.2 3,363.6 5.2 151.3 3.2 0.4 84.3 3.0

2020E 29,619.4 17,414.6 16,266.5 25.2 170.3 14.2 1.6 17.4 2.7

2021E 34,459.4 20,723.4 19,266.3 29.9 192.6 14.9 1.7 14.7 2.4

2022E 38,964.3 24,453.6 21,763.4 33.8 217.1 15.0 1.7 13.0 2.1

Adj. BVY/E MarNet Interest

Income

Non Interest

IncomeAdj. PAT EPS

Target Price ₹ 566 CMP ₹ 439 FY22E P/Adj BV 2.1x

Index Details Post the elevation of Mr. Sandeep Bakshi to CEO of ICICI Bank,

there have been significant positive changes in its strategy with

regards to growth and risk mitigation. There is a marked effort to

reduce risk by going granular and not compromising on

profitability in product pricing. This renewed focus, along with the

brisk growth, improving asset quality and benign valuation (w.r.t

peers) provides a heady concoction for a re-rating. We initiate with

a BUY for a 24 months price target of Rs. 566, representing an

upside of 30% from the CMP of Rs. 439. We have used the SOTP

valuation methodology to value the Bank.

We estimate a 14% CAGR loan growth to Rs. 8,67,863 crs over the

period FY19-22, driven by an 11% CAGR growth in corporate

advances (FY22 - Rs.1,93,434) and 17% CAGR growth in retail

loans (FY22 – Rs. 5,64,934 crs) over the same period. The growth

in advances is well supported by growth in total deposits. We

anticipate a 14% CAGR growth in total deposits from Rs. 6,52,920

crs in FY19 to Rs. 9,80,547 in FY22 crs based on similar growth in

CASA deposits. CASA will continue to be at 49% of total deposits

On the back of robust lending we expect NII growth of 13% CAGR

to Rs. 38,964 crs by FY22 with NIMs expanding by 18 bps to 3.4%,

driven by improving yields and relatively flat cost of funds. This is

expected to lead to PPoP growth of 18% CAGR to Rs. 38,051 crs by

FY22. With asset quality expected to improve, credit costs are

expected to taper to 0.9% (-273 bps) by FY22. As a result, GNPA

and NNPA are expected to improve by 340/60 bps to 3.3%/1.5%,

respectively, by FY22. Adequate existing provisioning will ensure

that future provisions will remain subdued. On the back of an all-

round improvement in financial performance, we expect net

earnings to

Sensex 39,395

Nifty 11,789

Industry Banking

Scrip Details

MktCap (`cr) 2,81,656

BVPS (`) 168.1

O/s Shares (Cr) 644.7

AvVol (Lacs) 181.4

52 Week H/L 441.6/256.5

Div Yield (%) 0.3

FVPS (`) 2.0

Shareholding Pattern

Shareholders %

Promoters 0.0

Public 100.0

Total 100.0

ICICI vs. Sensex

150

200

250

300

350

400

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500

15000

20000

25000

30000

35000

40000

45000

Jun

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r-1

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Jun

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p-1

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c-1

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Ma

r-1

8

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SENSEX ICICI Bank

ST

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- Monday 1st July, 2019


grow by 86% CAGR to Rs. 21,763 crs by FY22. Return ratios - ROE

and ROA - should also see an improvement by +1181/+129bps to

15% and 1.7%, respectively, by FY22. Cost to income is expected to

improve to 40% (-355bps) and Tier 1/CAR of 15%/16% indicates

adequate room to grow without the need to raise equity.



❖ Key Investment highlights

❖ FY08 – FY10 The onset of the global financial crisis

• FY 2008 marked the onset of the global economic meltdown. An overheated

economy and highly leveraged corporates were sharply impacted by the

sudden slowdown. ICICI Bank too was not spared.

• Advances declined from Rs 2.26 lac cr in FY08 to Rs.1.81 lac cr in FY10.

However, the Bank managed to improve its NIMs from 3.5% in FY08 to 4% in

FY10 due to a boost in the CASA deposits which increased to 42% by FY10

(26% in FY08).

• However, with the collapsing economy, asset quality took a hit and higher

provisioning led to the fall in net profit. The net profit fell by a CAGR of 2%

from Rs. 4,158 crs in FY08 to Rs. 4,025 in FY10. GNPA and NNPA increased

from 2.98%/1.49% in FY08 to 3.74%/1.87% in FY10. This had a telling effect

on the ROE and ROA (FY08-1.05%/11.1% and FY10- 0.9%/7.9%) which lead

to a sharp decline in valuation as well.

❖ FY11 – FY14 Change in guard

• Mrs. Chanda Kochhar was appointed as CMD of ICICI Bank in 2009. During

her stint, there was a change in the Bank’s focus from business growth to

asset quality. The new management developed a new strategy which was

called “5C”. The strategy focused on credit quality, credit growth, customer

centricity, cost optimization, and CASA ratio.

• Led by a global recovery, there was a pick-up in lending (CAGR of 16% to

Rs.2.54 lac crores). This in turn led to NII/PPoP/Net profit reporting a CAGR of

19%/14%/25% during FY11 to FY14 on account of improved asset quality and

recovery in global markets. During the same period, advances grew at CAGR

of 17% whereas GNPA and NNPA declined significantly from 3.74%/1.87% in

FY10 to 2.56%/0.82% in FY14.

• It also managed to demonstrate improvement in RoAA and RoAE to 1.7%

(+63bps) and 14% (+612bps) respectively during the same period.

• CASA ratio remained stable at 42%.



60%

80%

100%

120%

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E

Advances Total deposit Credit to deposit

(Rs. crs)

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

FY07 FY08 FY09 FY10 FY11 FY12 FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E

NII PPOP PAT

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

FY07 FY09 FY11 FY13 FY15 FY17 FY19 FY21E

GNPA NNPA

Key Highlights

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%

FY07 FY09 FY11 FY13 FY15 FY17 FY19 FY21E

RoAE RoAA

Source: Ventura Research, Company



❖ FY15 – FY19 The muddle of legacy asset quality resurfaces

• The loan portfolio became more broad-based and the share of retail loans

improved steadily to 60% of overall advances as on FY19 from 43% in

FY15. Further, in view of the weak operating environment, the Bank

continued to adopt a cautious approach to growth in the corporate and

SME segments. It not only reduced the exposure to corporates from 29% of

the total loan book, as of FY15, to 24% in FY19 but had also shifted the mix

in favor of high rated corporates.

• During the period FY15-FY19, advances grew at 11% CAGR to Rs.

5,86,646 crores in FY19 from Rs. 3,87,522 crores in FY15. The growth was

mainly driven by strong retail performance in line with a shift of focus to de-

risk the balance sheet.

• NII moved in line with advances, which grew by 9% CAGR to Rs. 27,015

crores in FY19 from Rs. 19,040 crores in FY15.

• PPoP increased by 4% CAGR to Rs. 23,438 crores in FY19 from Rs.

19,720 crores in FY13. PPoP grew at a slower pace compared to NII on

account of higher cost to income ratio.

• The asset quality deteriorated sharply, and the Bank was required to

classify many large accounts as NPAs followed by aggressive provisioning.

GNPA rose to 6.7% in FY19 from 3.29% in FY15 and NNPA stood at 2.06%

from 1.40% during the same period.

❖ FY19 – FY22 – Back to the growth trajectory

With adequate provisioning done and asset quality normalizing, the growth

trajectory for the Bank has been set in motion. The management is now

focused on the retail segment and granular lending to high rated corporates.

We expect NII, PPoP and net earnings to grow at a CAGR of

13%/18%/86%, respectively. NIMs, ROE, and ROA are expected to stabilize

driven by: -

• Advances to witness a CAGR of ~14% from Rs. 5,86,646 crores in

FY19 to Rs. 8,67,863 crores in FY22, mainly driven by the retail

segment as the new management is conservative in its approach.

• Deposits to grow at 15% CAGR driven by high-cost term deposits to

Rs. 9,80,547 crores by FY22 from Rs. 6,52,920 crores in FY19 with

CASA remaining constant.

• NIMs are expected to expand from 3.23% in FY19 to 3.41% in FY22

due to improved corporate exposure and granular lending.

• Cost to income ratio is expected to normalize following growth in

interest income.



• Advances - growth on the back of granular lending

Advances are expected to grow at a CAGR of 14% from Rs. 5,86,646 crs in

FY19 to Rs. 8,67,863 crs by FY22E with a focus on improvement in core

profitability and target ROE. The growth would be driven by: -

• The Bank is trying to reduce dependence on home loans by

improving exposure to higher yielding loans (credit cards and

personal loans). We expect the retail segment to grow by 17% during

FY19 to FY22E.

• Corporate loan growth had slowed down in the past due to asset

quality issues and a slowdown in the economy. However, with

adequate provisioning and a healthy balance sheet, we expect the

corporate segment to grow at 11% from FY19 to FY22E. The SME

segment would grow at 12% during the projected period.

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

FY13 FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E

Retail Per Corporate Overseas SME

(Rs. crs)

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

FY1

7 F

Y18

FY1

9 F

Y20

FY2

1FY

22

FY1

7 F

Y18

FY1

9 F

Y20

FY2

1 F

Y22

FY1

7 F

Y18

FY1

9 F

Y20

FY2

1 F

Y22

FY1

7 F

Y18

FY1

9 F

Y20

FY2

1 F

Y22

(HDFC Bank) (ICICI Bank) (SBI) (Axis Bank)

Advances

• Deposits

Robust growth in advances

Strong lending growth with focus on quality Increasing granularity in retail


54% 54% 54% 54% 53% 52% 51% 51% 52% 51%

24% 21% 18% 17% 19% 18% 18% 19% 18% 18%

6%6% 6% 5% 4% 5% 5% 5% 5% 5%

12% 14% 16% 16% 15% 15% 14% 14% 14% 13%

2% 3% 4% 5% 6% 7% 9% 8% 8% 9%3% 3% 2% 3% 3% 3% 3% 3% 3% 4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


Home loans Vehicle loans Business banking Rural loans Credit cards Others

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%


RETAIL CORPORATE OVERSEAS SME



The biggest problem facing banks was the deposit accretion and as a

result, the credit-deposit ratio was significantly stretched. However, with the

NBFC crisis impacting other financial market, deposit mobilization should

gain traction. As a result, we expect the cost of deposits to remain

competitive, aiding the growth story. The silver lining is the CASA deposits

of ~50% which is on par with peers. We expect deposits to grow at a

CAGR of 15% over FY19- 22E on the back of similar growth in CASA. (CA

-14% CAGR and SA – 15% CAGR over FY19 to FY22E).

0

100,000

200,000

300,000

400,000

500,000

600,000

700,000

800,000

900,000

1,000,000

FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22E

Current account Savings Deposit Term Deposits

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

3,000,000

3,500,000

4,000,000

FY1

7 F

Y18

FY1

9 F

Y20

FY2

1 F

Y22

FY1

7 F

Y18

FY1

9 F

Y20

FY2

1 F

Y22

FY1

7 F

Y18

FY1

9 F

Y20

FY2

1 F

Y22

FY1

7 F

Y18

FY1

9 F

Y20

FY2

1 F

Y22


13% 13% 14% 14% 15% 16% 15% 15% 15% 14%

29% 30% 32% 32%35% 36% 35% 34% 35% 35%

0%

10%

20%

30%

40%

50%

60%


Current account Savings Deposit

Term - deposits to drive the overall growth

CASA to remain constant



0%

10%

20%

30%

40%

50%

60%

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

FY1

7 F

Y18

FY1

9 F

Y20

FY2

1 F

Y22

FY1

7 F

Y18

FY1

9 F

Y20

FY2

1 F

Y22

FY1

7 F

Y18

FY1

9 F

Y20

FY2

1 F

Y22

FY1

7 F

Y18

FY1

9 F

Y20

FY2

1 F

Y22


CASA and CASA ratio




0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

FY

17

FY

18

FY

19

FY

20

FY

21

FY

22

FY

17

FY

18

FY

19

FY

20

FY

21

FY

22

FY

17

FY

18

FY

19

FY

20

FY

21

FY

22

FY

17

FY

18

FY

19

FY

20

FY

21

FY

22


Net Interest Income

• NII to scale-up given gradual NIM expansion

• The cost of funds has fallen from 5.6% in FY16 to 4.7% in FY19 due to the

increase in the share of CASA deposits. However, we expect the cost of

funds to increase marginally from the current level of 4.7% to 4.9% by

FY22E due to an increase in the share of term deposits.

• The Bank has historically earned an average yield of 8.1% on its interest-

earning assets. However, the interest yielding asset were adversely

affected due to the stress in asset quality. The yield fell from 8.5% in FY16

to 7.6% in FY19. Going forward, on account of the lower interest rate

regime and better-quality lending, we expect yields to inch towards 8.3%

by FY22E.

• The Bank is expected to report an increase in NIMs on account of NPA

resolution and marked improvement in lending growth. NIMs have risen to

3.23% in FY19 from lows of 3.07% in FY18. During FY19-22E, we expect

the Bank to gradually expand its NIMs to 3.4%. We have considered a

13% CAGR FY19-22E growth in interest income on account of growth in

the loan book, along with NIMs expansion.

2%

3%

4%

5%

FY17

FY18

FY19

FY20

FY21

FY22

FY17

FY18

FY19

FY20

FY21

FY22

FY17

FY18

FY19

FY20

FY21

FY22

FY17

FY18

FY19

FY20

FY21

FY22


Net Interest Margin

Net Interest Income Net Interest Income

Net Interest Margin Net Interest Margin

2.0%

3.0%

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22EYield on advances Cost of funds NIM Cost of Deposits

0

5000

10000

15000

20000

25000

30000

35000

40000

45000




• Fee Income on the rise

Fee income is expected to experience renewed vigor, given the bullish

outlook on lending and consumption. Going forward, we expect fee income

to grow at a 15% CAGR from Rs. 11,990 crores in FY19 to Rs. 18,387

crores on account of stellar growth in retail loans and improvement in the

cards business.

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

-

5,000

10,000

15,000

20,000

25,000


Fee income Fee income as a % of other income

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

FY1

7

FY1

8

FY1

9

FY2

0

FY2

1

FY22

FY1

7

FY1

8

FY1

9

FY2

0

FY2

1

FY2

2

FY1

7

FY1

8

FY1

9

FY2

0

FY2

1

FY2

2

FY1

7

FY1

8

FY1

9

FY2

0

FY2

1

FY2

2


Fee Income

• Operating leverage enabling improved efficiency

The cost to income ratio has reached a peak of 44% in FY19. The

increase was mainly on account of low growth in interest income due to

curtailed lending and balance sheet clean up. We expect the cost to

income ratio to gradually decline to 40% by FY22E, backed by improved

and higher growth in interest income.

32%

34%

36%

38%

40%

42%

44%

46%

FY14 FY15 FY16 FY17 FY18 FY19 FY20E FY21E FY22ECost-Income Ratio

Strong uptick in Fee income

Cost efficiency is comparable to that of other large private banks



35%

40%

45%

50%

55%

60%

FY1

7 F

Y18

FY1

9 F

Y20

FY2

1 F

Y22

FY1

7 F

Y18

FY1

9 F

Y20

FY2

1 F

Y22

FY1

7 F

Y18

FY1

9 F

Y20

FY2

1 F

Y22

FY1

7 F

Y18

FY1

9 F

Y20

FY2

1 F

Y22

(Axis Bank)(SBI)(ICICI Bank)(HDFC Bank)

Cost to income ratio



• Pre-provisioning profit (PPoP) – Strong momentum to continue

The growth in PPoP for the Bank has historically been in line with growth in

total income on account of stable cost to income ratio. However, with

growth in lending, fee income and stabilized cost environment, we believe

PPoP will grow at a CAGR of 18% from Rs 23,438 crores in FY19 to Rs.

38,051 by FY22E.

0

5000

10000

15000

20000

25000

30000

35000

40000

45000


• Asset quality to show marked improvement

We expect a drastic improvement in asset quality on account of the

following:-

• Gross addition to GNPA has reduced from INR 33,500 cr in FY17 to INR

11,000 in FY19 and would continue to be in a similar range.

• BB and below-rated book have fallen from highs of 19.6% in FY16 to an

acceptable level of 4.5% of total advances in FY19. BB and below-rated

book now stands at INR 17,525 cr in Q4FY19 of which INR 11,405 cr

belongs to the power sector. Over 90% of disbursements in FY19 was to

corporates rated A- and above.

• The funded and non-funded exposure of the Bank to NBFCs, HFCs and

Builder portfolio is INR 29,368 cr, INR 13,858 cr and INR 19,633

respectively. The total exposure to top 10 borrowers has reduced from

18.5% in FY16 to 13.6% in FY19.

• The management expects a marked improvement in asset quality on

account of more than adequate provisioning and recoveries leading to

write-backs. We expect GNPA and NNPA to fall drastically from current

levels of 6.7%/2.1% to 3.3%/1.5% by FY22.

Growth in PPoP


0

20,000

40,000

60,000

80,000

100,000

120,000

FY1

7 F

Y18

FY1

9 F

Y20

FY2

1FY

22

FY1

7 F

Y18

FY1

9 F

Y20

FY2

1 F

Y22

FY1

7 F

Y18

FY1

9 F

Y20

FY2

1 F

Y22

FY1

7 F

Y18

FY1

9 F

Y20

FY2

1 F

Y22


PPoP



0%

1%

2%

3%

4%

5%

6%

7%

8%

9%

10%

0.00

10,000.00

20,000.00

30,000.00

40,000.00

50,000.00

60,000.00


GNPA NPA GNPA ratio NNPA ratio

• Adequately Capitalized

The Bank’s Capital Adequacy Ratio (CAR) as per Basel III norms continues to remain strong at 16.7% with a Tier-I capital ratio of 14.7%. This will help the Bank to grow its business further without raising fresh equity in the near to medium term. The Tier-I CAR of 14% in FY22 is comfortable and we don’t expect the Bank to raise fresh equity capital for the forecast period.

17% 18% 16% 17% 16% 15%

14%16%

15% 15% 14% 14%

0%

5%

10%

15%

20%

25%

30%

35%

40%

FY17 FY18 FY19 FY20E FY21E FY22E

CAR Tier 1

Improving GNPA and NNPA

Healthy CAR and Tier I



0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

FY

17

FY

18

FY

19

FY

20

FY

21

FY

22

FY

17

FY

18

FY

19

FY

20

FY

21

FY

22

FY

17

FY

18

FY

19

FY

20

FY

21

FY

22

FY

17

FY

18

FY

19

FY

20

FY

21

FY

22

CAR Tier 1


0%

2%

4%

6%

8%

10%

12%

14%

FY

17

FY

18

FY

19

FY

20

FY

21

FY

22

FY

17

FY

18

FY

19

FY

20

FY

21

FY

22

FY

17

FY

18

FY

19

FY

20

FY

21

FY

22

FY

17

FY

18

FY

19

FY

20

FY

21

FY

22


GNPA and NNPA



• ROA/ ROE - Improvement kicks in

Aggressive recognition of bad assets led to higher credit costs. This led to

ICICI Bank’s RoA/RoAE dwindling from 1.7%/13% on an average over

FY14-16 to 0.36%/3.15% in FY19. The average credit cost was 3.3% over

FY16-19 as against 1.1% over FY13-16. We estimate credit cost to fall to

1.1%/0.95%/0.85% in FY20/FY21/FY22 driven by:

a) lower incremental provisioning due to excess provisioning done in

FY19;

b) slowing gross addition to GNPA;

c) cost-income ratio is also expected to moderate. Therefore, RoA/ROAE

will improve from 0.36%/3.15% in FY19 to 1.7%/15% by FY22E.

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

12.0%

14.0%

16.0%


RoAE

0.0%

0.2%

0.4%

0.6%

0.8%

1.0%

1.2%

1.4%

1.6%

1.8%

2.0%


RoAA

0.1%

0.4%

0.7%

1.0%

1.3%

1.6%

1.9%

FY1

7

FY1

8

FY1

9

FY2

0

FY2

1

FY2

2

FY1

7

FY1

8

FY1

9

FY2

0

FY2

1

FY2

2

FY1

7

FY1

8

FY1

9

FY2

0

FY2

1

FY2

2

FY1

7

FY1

8

FY1

9

FY2

0

FY2

1

FY2

2

Return on Asset


Normalizing Return ratios

0.0%

5.0%

10.0%

15.0%

20.0%

25.0%

FY1

7

FY1

8

FY1

9

FY2

0

FY2

1

FY2

2

FY1

7

FY1

8

FY1

9

FY2

0

FY2

1

FY2

2

FY1

7

FY1

8

FY1

9

FY2

0

FY2

1

FY2

2

FY1

7

FY1

8

FY1

9

FY2

0

FY2

1

FY2

2


Return on Equity




❖ Financial Performance

In Q4FY19, core operating profit of ICICI increased by 25.8% YoY to Rs. 6,077

crores. The bank reported a healthy growth of 14.5% YoY to Rs. 5,86,646 cr in

the loan book, driven by robust growth in the retail and SME segment. The

corporate segment now comprises only 24% of the total loan book. Over 90% of

the disbursements in FY19 in the domestic and international corporate portfolio

was to corporates rated A- and above.

Deposits witnessed a growth of 16.4% to Rs. 6,52,900 crores by Q4FY19 from

Rs. 5,60,900 as on Q4FY18. The average CASA deposits increased by 13.1%

YoY whereas, the Bank reported CASA ratio of 50% in Q4FY19 from 45.9% in

Q4FY19 due to faster growth of term deposits. GNPA decreased from Rs. 54,063

crores as on Q4FY18 to Rs. 46,292 crores as on Q4FY19. The net NPAs

decreased by over 50% from Rs. 27,886 crores at Q4FY18 to Rs. 13,577 crores

at Q4FY19. This resulted in an improvement in PCR from 47.7% in Q4FY18 to

70.6% in Q4FY19.

For FY19, the Bank has witnessed a growth of 17% in core operating profit to Rs.

22,072 crores in FY19 from Rs. 18,940 crores in FY18 with NIMs improving from

3.2% in FY18 to 3.4% in FY19. PAT has declined by 50% from Rs.6,777 crores in

FY18 to Rs. 3,363 crores in FY19 due to an increase in provisions by 14% in

FY19.

DESCRIPTION (Rs in cr) Mar-19 Dec-18 QoQ YoY Sep-18 Jun-18 Mar-18 Dec-17 Sep-17 Jun-17 FY19 FY18 YOY

Interest Earned 17,292 16,280 6% 21% 15,106 14,722 14,264 13,665 13,577 13,459 63,401 54,966

Interest Expended 9,673 9,405 3% 17% 8,688 8,620 8,243 7,960 7,868 7,869 36,386 31,940

Net Interest Income 7,619 6,875 11% 27% 6,418 6,102 6,022 5,705 5,709 5,590 27,015 23,026 17%

NIM 3.7% 3.4% 3.3% 3.2% 3.2% 3.1% 3.3% 3.3% 3.4% 3.2%

Other Income 3,621 3,882 -7% -36% 3,156 3,852 5,679 3,167 5,186 3,388 14,512 17,419

Fee Income 3,696 3,639 2% 8% 3,611 3,417 3,421 3,237 3,148 3,009 14,363 12,815

Total Income 11,240 10,757 9,574 9,954 11,700 8,872 10,895 8,978 41,527 40,445

Operating Expenses 5,008 4,612 9% 20% 4,324 4,145 4,186 3,814 3,909 3,794 18,090 15,703

Cost to income % 44.6 42.9 45.2 41.6 35.8 43.0 35.9 42.3 43.6 38.8

Operating Profit before Prov.& Cont. 6,233 6,145 1% -17% 5,250 5,808 7,514 5,058 6,987 5,183 23,437 24,742 -5%

Exceptional Items - - - - - - - - - -

Provisions 5,451 4,244 28% -18% 3,994 5,971 6,626 3,570 4,503 2,609 19,661 17,307

PBT 781 1,901 -59% -12% 1,255 -163 888 1,488 2,484 2,575 3,776 7,435

Tax -187 297 -163% 42% 347 -43 -132 -162 425 526 413 657

Tax Rate % 16% 28% 27% 17% 20% 11% 9%

Profit After Tax 968 1,604 -40% -5% 909 -120 1,020 1,650 2,058 2,049 3,363 6,778 -50%

GNPA 6.7% 7.8% 8.5% 8.8% 8.8% 7.8% 7.9% 8.0% 6.7% 8.8%

NNPA 2.1% 2.6% 3.7% 4.2% 4.8% 4.2% 4.4% 4.9% 2.1% 4.8%

CAR 16.9% 17.2% 17.6% 18.4% 18.4% 16.9% 16.2% 17.5% 16.9% 16.5%

ROA 0.4% 0.7% 0.4% 0.0% 0.5% 0.8% 1.1% 1.1% 0.4% 0.9%

ROE 3.6% 6.0% 3.4% 0.0% 3.9% 6.3% 8.0% 8.0% 3.2% 6.6%




❖ Financial Outlook

With adequate provisioning done and asset quality normalizing the growth

trajectory for the Bank has been set in motion. We expect NII, PPoP and net

earnings to grow at CAGR of 13%/18%/86% respectively. NIMs, ROE, and ROA

are expected to stabilize driven by: -

a) Advances to witness growth of CAGR~14% from Rs. 5,86,646 crores in FY19

to Rs. 8,67,863 crores in FY22 mainly driven by the retail segment as the new

management is conservative in its approach.

b) Deposits to grow at 15% CAGR driven by high-cost term deposits to Rs.

9,80,547 crores by FY22 from Rs. 6,52,920 crores in FY19 with CASA

remaining constant.

c) NIMs are expected to expand from 3.23% in FY19 to 3.41% in FY22 due to

improved corporate exposure and granular lending.

d) Cost to income ratio is expected to normalize following growth in interest

income.

❖ Valuation

At CMP of INR 439, we initiate with a ‘BUY’ recommendation with a Price Target

of INR 566 based on SOTP valuation, representing an upside of 30% over a

period of 24 months.

Sum of the parts valuationAUM/Book/Earnings/

Embeded valueMultiple

Total Valus

(crores)

ICICI Bank's

stake

Value attributable to ICICI

Bank (crores)

Value

per

share

Valuation Methodology

Core business 141,621 2.1x 300,237 100% 300,237 466 2.1x FY22E ABV

ICICI Prudential Life insurance

Company (53% stake)30,913 2.1x 64,918 53% 34,406 53 2.1x FY22E EV

ICICI Lombard General Insurance

(56% stake)2,002 30.0x 60,060 56% 33,634 52 30x FY22E PAT

ICICI Asset management (53%

stake)442,793 5.0% 22,140 53% 11,734 18 5% of FY22E AUM

ICICI Securities 593 12.0x 7,116 79% 5,622 9 12x FY22E PAT

ICICI Home Finance 2,281 1.0x 2,281 100% 2,281 4 1x FY22E BV

Banking subsidiary 6,671 0.7x 4,670 100% 4,670 7 0.7x FY22E BV

Total Value of Subsdiaries 92,346 143

Less: Hold co discount at 30% 27,704 43

Discounted value of Subsidiaries 64,642 100

Target value for ICICI Bank 364,879 566



100

150

200

250

300

350

400

450

500

Jun-12 Jun-13 Jun-14 Jun-15 Jun-16 Jun-17 Jun-18 Jun-19

CMP 1.2x 1.6x 2x 2.4x 2.9x

HDFC Bank

SBIKotak

ICICI

Axis

IndusInd

10%

15%

20%

25%

1.0 1.5 2.0 2.5 3.0 3.5

FY22

Ro

E

FY22 P/ABV

ICICI Bank P/BV Trend

ROE VS P/BV



Financial Projections

Y/E March (` crore) FY18 FY19 FY20E FY21E FY22E Y/E March (` crore) FY18 FY19 FY20E FY21E FY22E

Income Statement Ratio Analysis

Interest Income 54,966 63,401 73,109 83,331 94,627 Efficiency Ratio (%)

Interest Expense 31,940 36,386 43,489 48,871 55,662 Int Expended / Int Earned 58.1 57.4 59.5 58.6 58.8

Net Interest Income 23,026 27,015 29,619 34,459 38,964 Int Income / Total Income 135.9 152.7 155.4 151.0 149.2

YoY change (%) 5.9 17.3 9.6 16.3 13.1 NII / Total Income 56.9 65.1 63.0 62.4 61.4

Non Interest Income 17,420 14,512 17,415 20,723 24,454 Other Inc. / Total Income 43.1 34.9 37.0 37.6 38.6

Fee income 10,341 11,990 14,148 16,129 18,387 Ope. Exp. / Total Income 38.8 43.6 42.0 41.0 40.0

Total Net Income 40,445 41,527 47,034 55,183 63,418 Net Profit / Total Funds 0.8 0.3 1.5 1.6 1.6

Total Operating Expenses 15,704 18,089 19,754 22,625 25,367 Credit / Deposit 91.3 89.8 90.6 89.9 88.5

Pre Provision profit 24,742 23,438 27,280 32,558 38,051 Investment / Deposit 36.2 31.8 27.2 25.2 22.1

YoY change (%) (6.6) (5.3) 16.4 19.3 16.9 NIM 3.1 3.2 3.2 3.3 3.4

Provisions & contingencies 17,307 19,661 6,947 6,869 6,960

Profit Before Tax 7,435 3,777 20,333 25,688 31,091 Solvency

YoY change (%) (34.1) (49.2) 438.3 26.3 21.0 Gross NPA (Rs. Cr) 54,063 46,292 33,819 28,483 28,639

Taxes 657 413 4,067 6,422 9,327 Net NPA (Rs. Cr) 27,886 13,577 10,822 11,547 12,584

Net profit 6,777 3,364 16,267 19,266 21,763 Gross NPA (%) 8.8 6.7 5.0 3.7 3.3

YoY change (%) (30.9) (50.4) 383.6 18.4 13.0 Net NPA (%) 4.8 2.1 1.6 1.5 1.5

Balance Sheet Per Share Data (`)

Equity 1,286 1,289 1,289 1,289 1,289 EPS 10.5 5.2 25.2 29.9 33.8

Reserves 103,868 107,074 120,087 135,500 152,911 Dividend Per Share - 1.0 5.0 6.0 6.8

Deposits 560,975 652,920 746,305 856,036 980,547 Dividend payout 19% 20% 20% 20%

Borrowings 182,859 165,320 171,650 196,888 225,526 Book Value 163.6 168.1 188.3 212.2 239.2

Other Liabilities & Provisions 30,196 37,851 37,851 37,851 37,851 Adjusted Book Value of Share 142.4 151.3 170.3 192.6 217.1

Total Liabilities 879,184 964,455 1,077,183 1,227,565 1,398,125

Cash & Balances with RBI 33,102 37,858 44,778 42,802 50,008 Valuation Ratio

Balances with Bank & call money 51,067 42,438 47,346 53,888 58,147 Price/Earnings (x) 41.7 84.3 17.4 14.7 13.0

Investments 202,994 207,733 202,912 215,550 216,966 Price/Book Value (x) 2.7 2.7 2.5 2.2 1.9

Loan and Advances 512,395 586,646 676,375 769,822 867,863 Price/Adj.Book Value (x) 3.1 3.0 2.7 2.4 2.1

Net fixed assets 7,904 7,932 8,032 8,132 8,232

Other assets 71,727 81,853 97,743 137,377 196,914 Return Ratio

Total Assets 879,189 964,460 1,077,187 1,227,570 1,398,130 RoAA (%) 0.8 0.4 1.6 1.7 1.7

RoAE (%) 6.6 3.2 14.2 14.9 15.0

Dupont Analysis

% of Average Assets Growth Ratio (%)

Net Interest Income 2.8 2.9 2.9 3.0 3.0 Interest Income 1.5 15.3 15.3 14.0 13.6

Non Interest Income 2.1 1.6 1.7 1.8 1.9 Interest Expenses (1.5) 13.9 19.5 12.4 13.9

Net Income 4.9 4.5 4.6 4.8 4.8 Fee income 9.4 15.9 18.0 14.0 14.0

Operating Expenses 1.9 2.0 1.9 2.0 1.9 Other Income (10.7) (16.7) 20.0 19.0 18.0

Pre Provision profit 3.0 2.5 2.7 2.8 2.9 Total Income (1.9) 2.7 13.3 17.3 14.9

Provisions & Contingencies 2.1 2.1 0.7 0.6 0.5 Net profit (30.9) (50.4) 383.6 18.4 13.0

Taxes 0.1 0.0 0.4 0.6 0.7 Deposits 560,975 652,920 746,305 856,036 980,547

ROAA 0.8 0.4 1.6 1.7 1.7 Advances 512,395 586,646 676,375 769,822 867,863



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