ICICI Bank

11 Feb

Need to see countercyclical flows in debt mutual funds- Mr S Naren, ICICI Prudential AMC

Update on the Indian Equity Market:

On Monday, NIFTY closed -0.55% lower. Among the sectoral indices, Metal (-3.0%), Auto (-2.5%), Media(-1.6%) closed lower. None of the sectoral indices closed on a positive note. The biggest gainers were UPL(+4.8%), Bajaj Finance (+1.6%), and Kotak Bank (+1.2%) whereas Zee Entertainment (-7.2%), M&M (-7.2%), and Tata Steel (-5.9%) ended with losses.

Edited excerpts of an interview with Mr S Naren, Executive Director and Chief Investment Officer, ICICI Prudential AMC with CNBC-TV18:

  • Mr Naren said the recent policy that the Reserve Bank of India (RBI) has come up with of giving term repo, may act as a trigger. Any bank that has surplus government securities gets easy access to cheap money to do onward lending.
  • This may bring down rates which may act as a route to give good returns on credit funds.
  • He further saidif valuations are attractive, cycle is attractive and people are not willing to look at the asset class in a big way then one should not bother about triggers, automatically trigger will come and money will be made.
  • Speaking on telecom sector he said, as long as we are dependent on telecom, the few survivors should do better because the amount of money that people spend on telecom each month is high.
  • There is a lot of opportunity in India and he said, it is better if we have 3 survivors in a big country like India and all the 3 should have a superb outlook for the next decade or two.
  • About the flows into mutual fund, he said theinvestors in India have been behaving brilliantly. Whenever markets go up the flows drop and whenever markets go down flows go up.
  • SIPs are stable. Itis only the debt side of business that is not having countercyclical flows.
  • There is a need to see countercyclical flows in debt schemes as equity schemes because there are opportunities which are being missed.
  • The debt mutual funds are equally important part in every investor’s asset allocationaccording to him.
  • The company is successful in getting money in asset allocator, fund of fund and categories like balanced advantage but target of getting mega funds in debt mutual fund is not achieved.

Consensus Estimate (source: market screener and investing.com websites)

  • The closing price of ICICI Bank was ₹ 535/- as on 10-February-20. It traded at 32x/ 18x/ 15x the consensus earnings estimate of ₹ 16.6/ 29.0/ 35.5 for FY20E/FY21E/FY2E respectively.
  • Consensus target price of ₹ 624/- implies a PE multiple of 18x on FY22E EPS of ₹ 35.5/-.

 

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05 Aug

ICICI Bank 1QFY20 Results: Decent growth in advances, Asset quality intact

Dated: 29th July 2019

Result update:

  • Reported NII grew 27% YoY (+2% QoQ) to Rs 77,374 mn from Rs 61,019 mn. NIMs for 1QFY20 expanded by 42 bps YoY 3.61% compared to 3.19% in 1QFY19.
  • PPOP grew 8% YoY (+1% QoQ) to Rs 62,884 mn from Rs 58,083 mn.
  • Provisions were Rs 34,957 mn, 41% lower YoY.
  • Reported PAT was Rs 19,080 mn in 1QFY20 against loss of Rs 1,196 mn in 1QFY19.
  • GNPA and NNPA improved slightly sequentially at 6.49% and 1.77% respectively for 1QFY20 compared to 6.70% and 2.06% respectively in 4QFY19.
  • Advances grew 15% YoY to Rs 59,24,150 mn. Retail and SME segment showed a solid growth of 22% and 24% YoY respectively.

Management commentary:

  • The bank maintained its guidance that credit costs in FY20 would be significantly lower than 2% levels of FY19. Credit costs would be in the range of 1.2-1.3% in FY20. In 1QFY20, credit cost was 1.5%.
  • While provisioning in FY20 is expected to be lower than FY19, management does not expect slippages to come down significantly in FY20 compared to FY19, as it have already come down substantially in FY19.
  • The bank stated it is not looking at raising the PCR from current levels of 74% as they are now at comfortable levels.
  • The bank reiterated its consolidated RoE target of 15% by June’20.
  • Q1FY20 tax rate of 32% is an estimate for the full year tax rate.

 Consensus Estimate (Source: marketscreener website)

• The stock price was Rs 428/- on 29th July 2019 and traded at 2.2x/1.9x  consensus Book value of Rs 199/222 for FY20E/21E respectively. 
• Consensus target price is Rs 485/- implying PB of 2.2x for FY21E BVPS of Rs. 222/-

Note:

NII- Net interest income

NIM- Net interest margins

PPOP- Pre-provision profits

NPA- Non-performing assets

AUM- Assets under management

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