(BSE Code: 532174) (CMP: Rs.354.30) (FV: Rs.2) By Amit Kumar Gupta
Incorporated in 1955, ICICI Bank, together with its subsidiaries, provides banking and financial services. It operates through the following segments - Retail Banking, Wholesale Banking, Treasury, Other Banking, Life Insurance, General Insurance and Others. It offers savings, salary, pension, current, other accounts and fixed, recurring and security deposits. It also provides home, car, two-wheeler, personal, gold and commercial business loans as well as loans against
securities; business loans such as working capital finance, term loans, collateral free loans, finance for importers and exporters, secured loans for credit card swipes as well as loans for new entities, schools and colleges; and credit, debit, prepaid, travel and corporate cards. In addition, it offers life, health, travel, car, two-wheeler, home and student medical insurance products; pockets wallet; fixed income products; investment products such as mutual funds, gold monetization schemes and initial public offerings (IPOs); online investment services; farmer finance, tractor loans and micro banking services; and agri-related services. It also provides portfolio management, trade, foreign exchange, locker, private and NRI banking and cash management services; family wealth and demat accounts; commercial banking, investment banking, capital markets, custodial, project and technology finance and institutional banking services as well as internet, mobile and phone banking services. As at 31 March 2018, it had a network of 4,867 branches and 14,367 ATMs.
The key strategic pointers of ICICI Bank’s Q2FY19 results were: (1) Gross slippage was Rs.31.17 billion compared to a 8quarter average of Rs.80.46 billion till Q4FY18, which indicates that the Bank has entered a lower slippage regime; (2) Global NIM (net interest margin) improved by 14 bps QoQ to 3.33%, driven entirely by expansion in domestic NIM; (3) Core fee income grew 16.5% YoY; (4) NII (net interest income) grew 12% YoY to Rs.64176 million; and (5) PAT declined 56% YoY at Rs.9089 million.
Of the total corporate slippage of Rs.23.57 billion, Rs.10.14 billion of slippage emerged from the sub-investment grade corporate and SME credit, which is the non-retail loan book stress pipeline superset. This defined sub-investment grade credit now stands at Rs.217.88 billion, which is 192 bps of Q1FY19 total credit (including non-fund). For the total loan book, sub-investment grade loans had a 6.8% share. Net security receipts stood at Rs.34.36 billion, which was notionally 63 bps of the loan book. PCR (provision coverage ratio) with and without written-off accounts stood at a healthy 69.4% and 58.9% respectively.
Domestic NIM improved to 3.71% on the back of (1) interest cost control driven by (a) not aggressively participating in bidding for wholesale deposits; (b) taking recourse to relatively low-cost refinance borrowings; (2) Yield improvement of 8 bps QoQ to 8.79% on the back of MCLR resets and loan mix change. While the share of domestic retail remained largely static QoQ at 57.3% of the global loan book, traction in higher yielding retail segment such as business banking (up 45% YoY to 5% share in retail book) and unsecured loans (up 43% YoY to 11.4% share) was salutary.
Technical Outlook: The stock looks good on the daily chart for medium-term investment. It has formed a ‘cup and handle’ pattern on the weekly chart and trades above all important moving averages like the 200 DMA level on the daily chart.
Start accumulating at this level of Rs.354.30 and on dips to Rs.324 for medium-to-long term investment and a possible price target of Rs.420+ in the next 12 months.