Higher NPL formation vs. broader market place expectation was a unfavorable and connected concerns dominated the earnings get in touch with. However, the Street may possibly look by means of this blip (mgmt. was positive on recoveries/collections trends) and as an alternative focus on the operating profit development. ICICIBC reported ~23% y-o-y development in core PPOP, driven by an ~18% y-o-y enhance in NII. NIM enhanced to 3.89% (+5bp q-o-q), driven by additional improvement in price of funds generating a new low of 3.82%, a decline of 13bp q-o-q.
Asset good quality suffered – gross NPL formation (as % of 12-month-prior consumer assets) was 4.6% (FY21: 2.3%, FY20: 2.4%). We believe the bank is positioning towards correct consumer choice, working towards getting a higher share of profit and payment pools, major us to raise extended-term book-worth multiples. We reiterate Buy and raise SOTP-based TP to Rs 790, implying 17% upside.
Loan and core PPOP development have been positives: Loans have been up .7% q-o-q with retail +1.2%, SME -1.7%, domestic corp. +.1%. Sequential retail loan development was driven by dealer financing, loan against shares and mortgages. The sequential loan mix may possibly have helped +5bp improvement in NIM. Core PPOP grew ~23% y-o-y, as a outcome. Savings balance development was robust with CASA (avg.) ratio of 43.7%.
Asset good quality suffered: Gross NPL formation at Rs 72.3 bn was larger than expectation. Wholesale and retail slippages have been .8% and 6.7%, respectively. Rural portfolio contributed 30% of retail slippages. CV segment NPLs was elevated, though cards/individual fared much better. Total COVID-19 restructuring invoked was only
Rs 48.6 bn (.7% of loans). Gross stressed assets (gross NPA, BB & beneath, COVID restructuring, safety receipts, and so on.) elevated 50bps q-o-q to 8% of gross consumer assets. The bank wrote back Rs 10 bn from contingent provisions though utilising Rs 12 bn towards larger provisions.
Change in estimates: We reduce FY22F-23F EPS estimates by ~3% to element in slightly larger credit fees. We anticipate FY21-24F EPS/adjusted BV CAGR at 25%/15%. Our new TP of Rs 790 incorporates the standalone bank at Rs 635 (2.6x P/B), life insurance coverage at Rs 75, common insurance coverage Rs 46, asset management Rs 27, securities Rs 28 and balance Rs 18, with a 20% holdco discount. Risk: flare-up in credit price, weaker loan development.