1. 17 January 2013
Update | Sector: Financials
ICICI Bank
Set for the next leap
Alpesh Mehta (Alpesh.Mehta@MotilalOswal.com); + 91 22 3982 5415
Sohail Halai (Sohail.Halai@motilaloswal.com) +91 22 3982 5430

2. ICICI Bank
ICICI Bank : Set for the next leap
Page No.
Summary ............................................................................................................ 3
Story in charts................................................................................................ 4-5
Core RoE on the upswing - expect 17%+ by FY15E ...................................... 6-8
RAM improves decisively: RoE improvement on the cards ...................... 9-13
Consistently delivering on asset quality................................................... 14-16
Gradual improvement in margins to continue ........................................ 17-18
CASA ratio improves 1.7x since FY08 ........................................................ 19-21
Loan growth revives – retail loan to gather momentum ....................... 22-23
Healthy core operations; RoA's improved decisively .............................. 24-27
Financials and valuation ........................................................................... 28-29
Investors are advised to refer through disclosures made at the end of the Research Report.
17 January 2013
2

3. 17 January 2013
Update | Sector: Financials
ICICI Bank
BSE Sensex
S&P CNX
19,964
6,039
Bloomberg
ICICIBC IN
Equity Shares (m)
1,152.8
M.Cap. (INR b)/(USD b)
1,359/24
52-Week Range (INR)
1,210/762
1,6,12 Rel.Perf.(%)
-2/7/27
2013E 2014E 2015E
NII
138.0 168.0 201.5
OP
131.4 162.5 194.8
NP
81.3 100.2 120.6
NIM (%)
3.0
3.2
3.2
EPS (INR)
70.5 86.9 104.6
EPS Gr. (%)
25.8 23.2 20.3
BV/Sh. (INR)* 454.3 510.8 578.6
ROE (%)
14.6 16.1 17.2
ROA (%)
1.6
1.7
1.7
Payout (%)
30.0 30.0 30.0
Valuations
P/E (x)
16.5 13.4 11.1
P/BV (x)
2.1
1.9
1.6
Adj P/ABV (x) 2.2
1.9
1.6
*BV adjusted for investment in
susbdiaries, Prices adj for sub value
TP: INR1,400
Buy
Set for the next leap
Expect earnings CAGR of 23%+; Rising RoEs to drive more re-rating


Valuation summary (INR b)
Y/E March
CMP: INR1,163


ICICI Bank (ICICIBC) is expected to deliver EPS CAGR of 23%+ over FY12-15E, on a higher
base of 25%+ over FY10-12, driving up the core RoE from ~10% in FY10 to 17%+ in
FY15E. Importantly, the Tier 1 would remain strong at 10%+ at end-FY15.
With a market share of 4.2% in the domestic loans and largest branch network in the
private financials, above industry growth and favorable margins will drive earnings.
ICICIBC has managed the asset quality well during the last 18 months of pain in the
Indian economy. While FY14 will be critical to see the fate of few large exposures, the
bank is confident of tiding over this without any dent on its profitability. Recovery in
Indian economy / corporate capex will be viewed positive for ICICIBC.
Valuations for ICICIBC will evolve as it delivers RoE improvement over the next 2 years
(to come at the near sector averages). Importantly, it will have scope to further boost
its leverage as capital may get boost from return of capital by key subsidiaries.
Subsidiaries transform from being guzzlers to capital providers to parent
ICICIBC has not infused any capital in its subsidiaries for the past three years.
Corrective measures and consolidation has led to significant CRAR improvement
for ICICI UK and ICICI Canada. Presently, most of the bank's subsidiaries have
become self-sufficient. In the medium term, listing of life insurance business
[capital support of INR49b (our estimate) under Basel III] and repatriation of
capital from international subsidiaries will reduce capital charge ensuring
dilution-free growth.
Core operations improve decisively, core RoE to reach 17%+ by FY15E
Shareholding pattern %
As on
Dec-12 Sep-12 Dec-11
Promoter
0.0
0.0
0.0
Dom. Inst
24.8
25.3
27.8
Foreign
66.5
65.8
61.8
Others
8.7
8.9
ICICIBC's risk adjusted margins (RAM) have improved sharply from a low of 1% in
FY10 to 2.2% in FY12, led by a 95bp fall in credit cost and 25bp by margins
improvement. Despite lower growth in fee income, continuous margin
improvement (~50bp over FY12-15) and strong asset quality performance will
translate into strong RoA's of ~1.7% and core RoE is expected to improve to 17%+.
10.4
Significant improvement in asset quality in challenging times
Stock performance (1 year)
Even in challenging times, ICICIBC exhibited strong performance in asset quality,
with GNPA percentage declining over the past 10 quarters and provision coverage
ratio increasing from 53% in FY09 to 79% in 1HFY13. With retail delinquencies at
its historic lows credit cost estimates of average 70bp over FY13E-15E, compared
to 40bp in FY12, is conservative and factors the higher stress in corporate portfolio
leaving lower downside risk to our estimates.
Structural changes to ensure higher return ratios; valuation attractive
Return ratios are on an upward trajectory and structurally core operations of
ICICIBC has improved significantly, which would enable it to sustain the ratios.
Further unlocking of value from subsidiaries could lead to re-rating of the stock.
ICICIBC trades at near five-year average valuation, which is unwarranted
considering expected improvement in growth and RoE. Maintain Buy.
3

4. ICICI Bank
Story in charts Core operations have improved decisively...
 Sharp improvement in liability profile and...
 … Better risk management and focused growth (secured
loans)…
 … is Yielding results now; margins have improved
 … and credit cost is coming down
 Cutting excess flab helped to improve/maintain ROA…
 … despite being dragged down by fees; expect
contribution to stabilize
structurally
 Sharp improvement in CASA ratio, 1.7x since FY08
 Asset quality showing sharp improvement
 Focused strategies leading to sharp improvement in NIM…
 … and fall in credit cost
 Lean cost structure now - Adopted branch banking model
 Fees growth expected to track balance sheet growth
Source: Company, MOSL
17 January 2013
4

5. ICICI Bank
Story in charts ... increasing leverage to boost RoEs
 Core operations driving ROAs improvement….
 …. Improving leverage will lead to core ROE of 17%+ by
FY15
 Subsidiaries adequately capitalized; unlikely to need
 … capital repatriation and stake sale in insurance to lead
to improvement in Tier I in FY15
 Trading at near LPA multiple expect re-rating as RoE's
evolve over next 2 years
capital anytime soon…
 NIM and Credit cost driving ROA higher
 RoE on an upward trajectory
 Investment in subsidiaries likely to decline
 BASEL III: Adequately capitalized till FY15
For illustrative purpose only, capitalization under BASEL III.
 With a better RoE, PE below LPA; PBV at LPA
Source: Company, MOSL
17 January 2013
5

6. ICICI Bank
Core RoE on the upswing - expect 17%+ by FY15E
Subsidiaries: From capital guzzlers to capital providers for lending business



ICICIBC's core operations have turned around and RoA has improved to 1.5%+ in FY12 led
by 1) higher margins, 2) sharp fall in credit cost and 3) control over opex. However, core
RoE improvement was restricted to just 13% due to strong capitalization (Tier I ratio 12.5%+).
Improving margins are likely to compensate for any uptick in credit cost. Fee income
growth is expected to track balance sheet growth and as the benefit of correcting operating
inefficiencies is already reaped, fees and opex are unlikely to contribute meaningfully to
RoA improvement. Overall, we expect core RoA to improve to 1.7%+. As ICICIBC would
continue to leverage, core RoE is expected to improve to 17%+ by FY15E.
Subsidiaries have become self-sufficient in funding their own growth. From being capital
guzzlers, they would provide capital to fund the bank’s core lending business.
Moderation in growth and higher capital requirement brought RoEs lower
Cumulative capital
infusion over FY06-08
was of INR305b (~50% of
existing net worth)
Though over FY03-05, ICICIBC reported an average RoE of ~20%, frequent dilutions
(FY05, FY06 and FY08) and consolidation in balance sheet over FY08-10 (post asset
quality issue in FY08) lowered the core RoE to 10% in FY10. The bank raised INR32.5b,
INR78.2b and INR194b in FY05, FY06 and FY08 respectively taking the cumulative capital
infusion to INR305b (~50% of existing net worth). The need to raise capital was 1) to
support domestic business growth and 2) enhance capital in subsidiaries (investment
of INR100b over FY06-10).
International subsidiaries adequately capitalized; Repatriation to boost
capitalization
Repatriation of capital
would give a benefit of
INR14b to Tier I under
current Base II norms and
INR28b under Basel III
ICICIBC has not infused any capital in the international banking subsidiaries for the
past three years. Decline in balance sheet, lower MTM losses and internal accruals
led to significant improvement in capital adequacy ratios for ICICI UK and ICICI Canada
from 17.3% and 23.4% in FY10 to 33.6% and 34.1% in 2QFY13. ICICI Eurasia's CAR also
stands comfortable at 35%. With moderate growth plans for Canada and the UK
subsidiaries, ICICIBC mulls to repatriate excess capital from these subsidiaries.
Once capital is brought back into the parent company, it shall not only translate to
higher RoEs for international subsidiaries but also provide cushion to parent
Capitalization. The bank can potentially repatriate at least half of the capital ie US$350m
from the UK and CAD$500m from Canada. Thus, almost INR42b can be repatriated.
On a standalone basis, ICICIBC deducts 50% of the invested capital (i.e INR28b) in
Canada and UK Subs from Tier I capital and rest from Tier II capital. With repatriation
(assuming 50%), it would eventually give a benefit of INR14b to Tier I under current
Base II norms and INR28b under Basel III (whereby the entire investment in a subsidiary
has to be deducted from Tier I capital).
17 January 2013
6

7. ICICI Bank
... and capital gains from ICICI Prulife will keep capitalization healthy
Under Basel III, overall
Tier I capital addition is
likely to be INR49b
(INR41b capital gains plus
INR8.2b deducted from
Tier I) from insurance
stake sale
Listing of the insurance venture too shall bring capital for the bank. Based on our current
estimates, it can almost bring INR49b (based on FY15E) potential capital to ICICIBC. Of
this, INR41b would be capital gains which will be directly added to net worth and Tier I
capital. Currently, the principal amount of INR8.2b (for 23% stake) is deducted from Tier
I and Tier II capital both in equal proportion. But under Basel III, the entire amount
would be deducted from Tier I. Hence, under Basel III, overall Tier I capital addition is
likely to be INR49b (INR41b capital gains plus INR8.2b deducted from Tier I) in FY15E.
Unlikely to raise capital till FY16E, unless growth outlook revives sharply
Adequately
capitalized till FY16
Under Basel III, the bank is likely to take a capital charge of ~100bp, mainly due to
higher deduction of investment in subsidiaries. Repatriation of capital and reduction
in ICICI Prulife’s stake could lead to addition of ~INR41b to net worth and release of
INR36b capital charge while calculating CAR (under Basel III). Hence, we believe ICICIBC
is unlikely to raise capital till FY16. Our base case assumption factors ~20% CAGR in
risk weighted assets, insurance stake sale in FY15E and repatriation of capital from
the UK and Canadian subsidiaries.
Addition to Tier I capital of INR41b
due to insurance stake sale
Basel III: Adequately capitalized at least till FY16E (INR m)
FY10
FY11
FY12
FY13
FY14
FY15
FY16
FY17
FY18
Assets
3,633,997 4,062,337 4,736,471 5,295,169 6,293,773 7,532,673 9,039,207 10,847,049 13,016,459
Growth
12
17
12
19
20
20
20
20
RWA
2,941,810 3,414,980 3,985,858 4,561,919 5,548,117 6,790,891 8,149,070 9,778,884 11,734,660
As a % of Assets
81
84
84
86
88
90
90
90
90
RoA
1.1
1.3
1.5
1.6
1.7
1.7
1.7
1.7
1.7
Payout
33
31
29
30
30
30
30
30
30
Tier I Capital
410,620 449,750
505,183 566,595 568,292 724,248 818,042
930,595 1,065,658
Deductions
123,696 118,882
108,531
99,891 163,221 124,082 124,082
124,082
124,082
Investments in subs
64,116
65,412
65,831
65,831 131,661
95,022
95,022
95,022
95,022
Securitisation
36,170
23,590
13,640
5,000
2,500
0
0
0
0
DTA and Others
23,410
29,880
29,060
29,060
29,060
29,060
29,060
29,060
29,060
Tier I Capital
14.0
13.2
12.7
12.4
10.2
10.7
10.0
9.5
9.1
Tier I under Basel II Guidelines
11.2
Impact of Basel III (in bp)
99
Note: For illustrative purpose only
Source: Company, MOSL
Impact of higher deduction
is 1% on Tier I capital
17 January 2013
Lower deduction on account of insurance stake
sale of INR8b and capital repatriation of INR28b
7

8. ICICI Bank
Frequent equity dilution for growth and capital requirement
of subsidiaries (INR b)
Incremental capital infusion in subsidiaries (INR b)
FY07 FY08 FY09 FY10 FY11 FY12
ICICI Pru Life Ins
Equity dilution of
17.2
2
19.
16.3
6.6
12.1
8.6
-
-
-
ICICI Lombard Gen Ins.
0.7
5.5
3.0
-
2.5
-
ICICI Pru AMC
0.5
-
-
-
-
-
ICICI Ventures
-
-
-
-
-
-
ICICI Securities
-
2.4
-
-
-
-
3.0
5.0
3.1
-
-
-
-
17.7
-
-
-
-
4.0
9.5
20.0
-
-
-
ICICI Home Finance
ICICI Bank UK
ICICI Bank Canada
Overall Investments
14.8
52.2
34.7
-
2.5
-
% of Netowrth
6.1
11.2
7.1
-
0.5
-
Networth
244
466
490 516 551 596
Source: Company, MOSL
22% of the networth invested in to subsidiaries (INR b)
Expect proportion of investment in subsidiaries (as a % of overall
networth) to come down (%)
Business growth and profitability declined over FY08-10 (%)
Expect core RoE to reach 17%+
Source: Company, MOSL
17 January 2013
8

9. ICICI Bank
RAM improves decisively: RoE improvement on the cards
Tight control on opex compensated for muted fee income growth



ICICIBC’s risk adjusted margin (RAM) has improved sharply from a low of 1% in FY10 to 2.2%
in FY12, of which 95bp is led by a sharp fall in credit cost (due to fall in proportion of unsecured
personal loans and credit cards and strong asset quality performance in corporate segment).
Addressing structural issues in the balance sheet and improvement in liability profile led to
a improvement in NIMs of 25bp over FY10-12. Cutting excess flab in the system drove
down cost to core income ratio to ~43% from highs of 58% in FY07.
Overall core PBT (core operating profit less NPA provisions) as a percentage to average
assets has improved to 1.9%+ in FY12 v/s 95bp over FY08-10. Despite a challenging scenario
to generate fee-based income, further improvement in margins and healthy asset quality
performance would keep core PBT strong over FY12-15E.
Sharp improvement in core profitability driven by focused strategies
Increase in credit cost
impacted profitability.
Consolidation for
structural improvement
in balance sheet became
a key mantra.
ICICIBC shifted its focus from aggressive growth (at times sacrificing profitability) and
market share to improving profitability even at the cost of growth. Over FY08-10,
sharp increase in slippages and moderate growth led to higher credit cost of 1.7%,
against an average of 0.5% over FY04-07, whereby RAM moderated to 1% in FY10 v/s
1.4% in FY07. While margins continued to improve post FY08 (NII/average asset
improved from 1.9% in FY07 to 2.2% in FY10) led by an improvement in liability profile,
moderation in growth and benefit of capital raising, higher credit cost kept RAM low
at less than 1.3% over FY08-10. To improve core operating profitability, management
adopted the following strategies:
(A) Unsecured retail loans trimmed to improve asset quality
Unsecured proportion of
loans declined from ~10%
(INR220b) to ~1.3%
(INR35b) at end-FY12
To build a healthy loan portfolio and resolve asset quality issues, ICICIBC reworked its
strategy by running down unsecured retail loan portfolio in favor of low-risk secured
loans and corporate loans. Thus, unsecured proportion of retail loans declined from
9.8% (INR220b) in FY08 to ~1.3% (INR35b) at end-FY12. A shift in portfolio mix towards
secured loans, tighter risk management practices and business loan sourcing via owned
branches instead of DSAs led to better credit appraisal and improvement in asset
quality. Hence, even in a phase of economic moderation, GNPAs declined from 4.6%
in FY10 to 3.1% at end-2HFY13, while NNPAs were down sharply to 66bp, against 1.9%.
De-risking loan portfolio by reducing proportion of unsecured loans
Credit cost declined sharply (%)
Credit cost remained high over FY08-10 due to higher NPAs provision coupled with contracting balance sheet. Benign asset quality in retail
segment and higher proportion of secured loans led to strong asset quality performance over the past 8 quarters.
17 January 2013
9

10. ICICI Bank
(B) Structural issues in balance sheet effectively dealt with
Focus on improving CASA
and reducing ALM
mismatches yielded
results
Lower CASA ratio, higher ALM mismatches (both domestic and overseas book), rising
share of international loans and overall aggressive growth leading to higher PSL
requirements etc kept margins lower till FY07 for ICICIBC, despite sharp increase in
high yielding unsecured retail loans. During the liquidity crisis period, margins fell
sharply due to higher roll-over cost of bulk deposits. Even aggressive growth in the
past, which led to risky underwriting, backfired leading to higher NPAs and interest
reversal. To improve margins, management focused on (a) improving CASA ratio (up
from 26% in FY08 to 40%+) and (b) reducing ALM mismatches. Strategies worked and
NIMs improved by 25bp despite higher NPAs in unsecured retail loans.
Share of CASA ratio improved significantly (%)
CASA deposits improved while loans declined in FY10 (INR b)
Continuous improvement in NII to average assets (%)
Margins remained in a
narrow range of 2.1-2.3%
over FY08-10. A sharp
improvement in CASA
ratio during the
consolidation phase led
to structurally higher
NIMs even as the bank
reduced its high-yielding
unsecured loan portfolio
Source: Company, MOSL
Proportion of working capital finance rise; mismatches reduced considerably
ALM improved
significantly as bank
reduced its dependence
on short term bulk
deposits
17 January 2013
ICICIBC had a mismatched ALM in FY08, with 65%+ of deposits maturing within a year,
corresponding to only ~30% of loans maturing within the same period. However, it
increased the proportion of working capital finance to the corporate segment and
reduced exposure to short term bulk deposits, which resulted in a well-matched
ALM. Hence, the share of deposits maturing within a year declined to 48% in FY12,
while share of loans maturing within a year was stable at 29%.
10

11. ICICI Bank
ALM Profile: Gap in less than one year bucket reduced considerably
FY07
< 1 1yr yr 3 yr
Deposits
Borrowings
Advances
Investments
68.9
41.3
28.1
54.7
29.2
30.9
39.0
17.1
>3
yrs
1.9
27.8
32.9
28.1
FY08
< 1 1yr
yr - 3 yr
64.8
41.7
30.7
57.0
33.2
26.9
34.3
18.7
>3
yrs
2.0
31.4
35.0
24.3
FY09
< 1 1yr
yr - 3 yr
65.8
32.5
24.0
42.4
33.5
35.7
40.6
25.3
>3
yrs
0.7
31.8
35.3
32.3
FY10
< 1 1yr
yr - 3 yr
48.0
27.1
32.0
43.4
51.0
32.1
39.4
24.5
>3
yrs
1.0
40.7
28.6
32.1
FY11
< 1 1yr yr 3 yr
44.1
34.1
30.7
35.6
52.2
20.9
41.1
26.7
>3
yrs
FY12
< 1 1yr
yr - 3 yr
>3
yrs
3.7 48.1 27.0 24.9
45.0 46.4 12.4 41.2
28.2 29.2 41.1 29.7
37.7 44.7 15.4 40.0
Source: Company, MOSL
(C) Focus on shedding excess flab; shift from agency model to branch banking
Despite the sharp
increase in branch
network and addition of
Bank of Rajasthan over
FY08-12, other operating
expenses to average
assets ratio declined to
100bp, against 163bp in
FY08
Of the 5C’s strategy introduced in FY08, improving cost efficiency was one of the
bank’s key focus areas. In the process, ICICIBC moved from an agency model to branch
banking to increase utilization of branches and tighten its risk management practices.
This also gave an opportunity to reduce opex as commission to DMA, which formed
25% of other operating expenditure, was significantly brought down to just 4% of
other opex. During FY08-12, operating expenses were largely flat, led by an 8% CAGR
decline in other operating expenses. Despite the sharp increase in branch network
and addition of Bank of Rajasthan over FY08-12, other operating expenses to average
assets ratio declined to 100bp, against 163bp in FY08 (DMA expenses which formed
40bp of average assets is now negligible).
Strong control over opex… (%)
ICICIBC derived
significant gains from
transiting to branch
banking model as against
agency model adopted
earlier
… despite rapid branch expansion is commendable (nos)
Addition of
822 branches*
Bank continues to grow
organically as well as
inorganically. Branch
network is 2x+ FY08
Addition of
507 branches
Addition of
154 branches
Addition of
291 branches
*Out of which 450 was on account of Bank of Rajasthan merger
17 January 2013
Addition of
213 branches
Source: Company, MOSL
11

12. ICICI Bank
Cost to average assets
best among peers
Cost to core income ratio improved from ~58% in FY07 to 43% in FY12, while cost to
average assets ratio declined from 2.2% in FY07 to 1.8% in FY12 (compared to 280bp
for HDFCB and 230bp for AXSB) – the best among peers. The lower cost to average
assets ratio is partially led by higher share of international business (25%), compared
to peers.
Sharp improvement in cost to core income ratio (%)
Cost to average assets ratio compared to peers (%)
Domestic cost to core income
ratio is at 47%, in our view
While the cost to average assets ratio increased for peers over FY09-12, ICICIBC reported a sharp improvement and is now the best among peers.
Moderation in balance sheet growth; core profitability improved sharply...
FY08-10: opex control
helped maintain RoA.
FY10-12: Sharp reduction
in credit cost drove
RoAs high
As mentioned earlier, ICICIBC effectively used the consolidation in business growth
phase (during FY08-10) to improve its balance sheet profile, address structural ALM
issues, improve risk management practices (credit cost declined to 40bp in FY12,
against 1.2% in FY08), shed excess flab in the system (cost to average asset ratio of
1.8% v/s 2.2% in FY08), reduce the risk on international subs books and for branch
expansion. Combination of these factors led to a sharp improvement in core
profitability, whereby RoA improved to 1.5% v/s 1.1% in FY10, despite pressure on
trading gains and fee income.
NIMs and opex control led to stable RoA (%)
Asset quality and margins drive RoA (%)
Blue indicates positive contribution to RoA; Black indicates negative carry on RoA's
17 January 2013
Source: Company, MOSL
12

13. ICICI Bank
…despite fee income being a drag on RoA
Fee income CAGR over FY08-12 was near zero, compared to balance sheet growth of
4.5%+ over the same period. Thus, fee income to average assets ratio gradually declined
from 1.8% in FY08 to 1.5% in FY12 and dragged RoA lower. Deceleration in balance
sheet (especially retail loans), decline in commission from distribution of third party
products and challenging macro environment (lower syndication and capital market
related fees) led to muted fee income performance over FY08-12.
Fee income growth continues to lag loan growth
Deceleration in balance
sheet and decline in
commissions led to lower
fee income growth
Fee income expected to improve over FY13E-15E
Fee income to average assets ratio lower compared
to peers – scope for improvement (%)
FY04-08
FY09-12
1.7
1.5 1.6
1.8 1.7
1.8 1.7
1.4
ICICIBC
FY13-15E
1.3
HDFCB
AXSB
Source: Company, MOSL
17 January 2013
13

14. ICICI Bank
Consistently delivering on asset quality
Estimate credit cost of 70bp over FY13-15E



Lower share of unsecured personal loans coupled with improved risk management practices
has helped ICICIBC to show a continuous improvement in asset quality (GNPAs percentage
declining over the past 10 quarters) even in a challenging macro environment.
Retail delinquency is at its historic lows leading to lower credit cost. ICICIBC has utilized this
opportunity to shore up its provision coverage ratio from 53% in FY09 to 79% in 1HFY13. We
are factoring a credit cost of 70bp in the overall portfolio for FY13E. Of which, if we assume
credit cost of 50bp on corporate loan portfolio (given very low delinquency in retail and
international portfolio) and with a 75% PCR, it implies net slippage ratio of 1.75%, which is
fairly conservative in our view.
While some stress in the large corporate segment may emanate, historic performance of
managing stress accounts viz. Kingfisher and Deccan Chronicle and lower restructured loan
portfolio should be given due credit. We estimate credit cost to increase to an average of
70bp over FY13E-15E, compared to 40bp in FY12. However, it would be offset by higher
NIMs and RAM is expected to remain healthy at 2.4%+ over FY13-15E v/s 2.2% in FY12.
Cushion built by improving PCR; Healthy asset quality performance
Improvement in asset
mix, better risk
management practies
led to fall in GNPAs
Aggressive growth in unsecured segment (over FY04-08) followed by moderation in
economic growth exerted pressure on asset quality, with the slippage ratio increasing
to 2.6% over FY09/10, against an average of 1.8% during FY04-08. Overall GNPAs posted
26% CAGR rise over FY07-10, led by 28% CAGR in retail segment GNPAs. However post
FY10, improved risk management practices and sharp reduction in unsecured personal
loans helped bank to show a continuous improvement in asset quality (GNPA %
declining over past ten quarters). And to provide adequate cushion to the balance
sheet, bank prudently increased its provision coverage ratio from 51% in 2QFY10 to
79% (one of the best in the industry) which provides comfort. In our view, benign
asset quality trend in the retail segment and cautious approach adopted would keep
ICICIBC’s asset quality healthy.
Consistent improvement in asset quality amidst tough macro
Net slippage ratio declined sharply over FY10-12
Source: Company, MOSL
17 January 2013
14

15. ICICI Bank
Strong growth in corporate segment over FY09-12
Increase in infrastructure
and power segment has
raised concerns;
performance so far better
than expectation
While overall loans clocked a CAGR of 5% over FY09-12, higher growth came from
domestic corporate segment (CAGR of 30%+ over FY09-12), and its share in overall
loans increased from 12% at end-FY08 to 23% at end-FY12. International portfolio and
SME CAGR over FY09-12 was at just 8% and 15% respectively. On a sector-wise analysis,
key growth drivers for ICICIBC over FY09-12 were 1) power (~38% CAGR and now
forms 5.4% of overall loans), 2) infrastructure (24% CAGR and now forms 6.9% of
overall loans) and 3) services – finance (26% CAGR and now forms 6% of overall loans).
Due to challenging macro environment and infrastructure related issues, strong
growth in corporate segment (especially power and infrastructure) remains a risk.
However, asset quality performance so far increases confidence.
Sector-wise GNPAs exhibits healthy trend
FY12
(INR m)
Services- Non Finance
Infrastructure
Iron/steel and products
Services – finance
Food and beverages
Power
Chemical and fertilizers
Wholesale/retail trade
Electronics and engineering
Construction
Mining
FY09
194,810
181,960
122,310
156,410
67,790
141,240
34,980
50,060
56,610
57,970
84,030
7.5
4.2
4.4
3.5
2.4
2.4
2.3
1.2
1.6
1.1
0.0
% of overall loans
FY10
FY11
7.2
5.5
4.6
3.4
3.3
3.0
2.5
2.4
1.7
1.0
0.2
7.7
5.8
4.2
7.2
3.1
4.4
1.3
2.3
2.0
1.6
1.8
FY12
CAGR
over
FY09-12
FY09
7.4
6.9
4.7
6.0
2.6
5.4
1.3
1.9
2.2
2.2
3.2
5
24
7
26
8
38
-12
24
16
34
329
0.2
N.A.
0.4
1.7
1.9
0.3
3.8
5.6
2.2
N.A.
N.A.
% GNPA
FY10
FY11
0.3
N.A.
1.7
3.8
2.6
0.2
5.3
4.9
2.2
N.A.
N.A.
Source:
FY12
0.2
0.2
N.A.
N.A.
0.2
0.8
1.4
0.7
4.1
3.9
0.2
0.1
7.0
4.5
7.4
4.2
1.5
4.2
N.A.
N.A.
N.A.
N.A.
Company, MOSL
Power projects in which ICICIBC participated have a DSCR of 1.5x+ and the average
break-even PLF is ~60%. Of the total power sector exposure, ~30-35% is in the nature
of working capital facilities. Of the project finance exposure, ~65% is covered by
PPAs. Of the total project finance facilities to thermal power generation sector, ~4550% of the exposure is based on captive coal. Thus, stress remains manageable.
Healthy performance in retail and international portfolios
Credit cost of 125bp on
corporate/other loan
portfolio and with an
assumption of 75% PCR, it
implies net slippage ratio
of 1.7%, which is
conservative in our view
17 January 2013
Retail delinquency is at its historic lows and is also evident in performance of some
peers viz. HDFCB and IIB which are predominantly a retail lender. While credit cost on
retail portfolio would be negligible for FY13, we factor credit cost of 70bp (in line with
management guidance) for the overall portfolio for FY13. Lower credit cost on retail
loans is also driven by healthy recoveries from written off retail accounts in the past.
The international portfolio (25% of overall) is also exhibiting strong performance.
Thus, estimated credit cost would largely (assuming 50bp of 70bp) pertain to domestic
corporate/other loans (40% of overall). This implies credit cost of 125bp on corporate/
other loan portfolio and with an assumption of 75% PCR, it implies net slippage ratio
of 1.7%, which is conservative in our view.
15

16. ICICI Bank
Proactive recognition of NPAs; lower restructured loans
ICICIBC’s handling of some stress accounts viz. Kingfisher and Deccan Chronicle
(proactively recognized and provided 85% on the same) and lower restructured loans
(1.5% of overall loans) should be given due credit. If stress in the environment
continues, then slippages are bound to increase (though manageable considering
performance so far) and have been adequately factored. We assume credit cost at an
average of 70bp over FY13E-15E, compared to 40bp in FY12. However, it would be
offset by higher NIMs and RAM is expected to remain healthy at ~2.4% over FY12-15E.
Proporation of restructured loans remains low
Credit cost contained even as bank continues to shore up PCR
76.6
(%)
RAM at 5-year high…
Risk adjusted margin (%)
…and strong performance is expected to continue
Risk adjusted margin (%)
RAM improves sharply by 170bp, from its bottom, and at 5-year high. Strong asset quality performance coupled with structural improvement
in NIMs led to higher RAM
Source: Company, MOSL
17 January 2013
16

17. ICICI Bank
Gradual improvement in margins to continue
ALM in better shape



Structural improvement in liability profile (CASA ratio improved to 40%+ in FY12 v/s 26% in
FY08) and lower securitization losses drove NIMs from 2.2% in FY08 to 2.7% in FY12 and 3%
in 1HFY13 – domestic NIMs are much higher at 3.4% at end-2QFY13.
In the backdrop of ICICIBC winding up high yielding unsecured loans (now 1.3% of overall
loans, against ~9.8% in FY08) in favor of lower yielding corporate and secured loans, NIMs
performance becomes more commendable.
With higher CASA ratio at 40%+, well-matched ALM, no securitization losses and stable/
falling share of international loans with relatively higher margins than past, overall margins
are expected to improve in FY13E-15E. We expect FY13E NIMs to be higher at 3% and
improve further 3.2% over FY14E-15E.
Focus on core liabilities; CASA growth maintains pace on a higher base
Benefit of improved
liability profile will
continue
One of the key success factors to improve bank’s margins has been the drastic
improvement in liability profile. We believe improvement in CASA ratio has been a
key driver for margin improvement and has also negated the impact of falling
proportion of high yielding unsecured retail loan. With balance sheet growth resuming,
we believe further improvement in CASA ratio is unlikely; however, strong branch
expansion and technology upgradation would help ICICIBC to keep the CASA growth
pace in line with overall balance sheet growth.
Winding up of margin-dilutive unsecured loan book behind
With unsecured loan book at ~1.3% of the overall loan book, the pace of decline in
high-yielding loans is largely behind. Further, NPAs from unsecured retail loans also
led to higher accumulation of non-interest bearing assets in the balance sheet. As the
large write-offs have already taken place and asset quality is showing positive trend,
we believe it shall provide a cushion to margins.
Securitization losses to decline, leading to margins improvement of 5bps
In FY13E, securitization
losses are expected to be
negligible and thus
would further aid
margins expansion.
ICICIBC had aggressively securitized its retail loan portfolio over FY04-07 and with an
increase in delinquency ratio, securitized losses increased. Over FY08-11, the bank
booked losses on securitization of INR5b per year, which had a negative impact of
~15bp on margins; losses declined to INR2b in FY12 and the negative impact on margins
was 5bp. In FY13E, securitization losses are expected to be negligible and thus would
further aid margins expansion.
ALM issues resolved in international balance sheet
International margins to
improve further
17 January 2013
International margins have already bounced back to 1.4% in 1HFY13, against an average
of ~85bp in FY11 and 1.25% in FY12. While further improvement would be a challenge,
if maintained at similar levels going forward, it would translate into 15bp improvement
in international NIMs over FY13 and provide a cushion to global margins.
17

18. ICICI Bank
Higher margin domestic business to grow faster than international business
ICICIBC has identified secured retail loans and domestic corporate loans as the key
focus area for growth. Management is not very optimistic on growth in the
international portfolio. Growth in retail loans has already started showing traction
and domestic corporate growth remains strong driven by working capital requirements.
In our view, for every 5% change in the mix, reported margins shall show an
improvement of 10bp in overall margins.
Structurally moving to higher NIMs (%)
Both domestic and international NIMs have
improved significantly (%)
With an improvement in liability profile, CoF increase has been Margins at historically high level but expected
restricted, thus providing a cushion to margins (%)
to improve further (%)
Source: Company, MOSL
17 January 2013
18

19. ICICI Bank
CASA ratio improves 1.7x since FY08
Branch expansion and use of superior technology to keep CASA ratio healthy



Over FY08-12, while CASA CAGR was 15%, overall deposits were flat leading to higher CASA
ratio of 40%+ in FY12 as against 26% in FY08.
Strong branch additions over the past two years, increasing branch productivity and qualitative
balance sheet growth would keep CASA ratio strong at 39%+.
With ~15% of the branch network less than 18-24 months old (excluding the branches from
merger of BoR), incremental contribution from these branches are expected to increase
significantly as they ride through the cycle of maturity.
CASA growth remains healthy; CASA ratio improves 1.7x since FY08
Strong branch additions
over the past two years,
increasing branch
productivity and
qualitative balance sheet
growth led to strong
CASA ratio of 39%+
ICICIBC was in a consolidation mode over FY08-10 to realign its liability profile by
aggressively shedding short term bulk deposits and increasing thrust on CASA
mobilization. Over FY08-12, CASA CAGR was 15%, while overall deposits were flat and
provided fillip to CASA ratio which increased from 26% in FY08 to 40%+ in FY12. If we
see in isolation, term deposits at end-FY12 were still lower by ~19% than that in FY08,
which demonstrated the bank’s key focus to build a strong balance sheet rather than
chase growth. Strong branch additions over the past two years, increasing branch
productivity and qualitative balance sheet growth could keep CASA ratio strong at
39%+.
Aggressive shedding of bulk deposits and thrust on CASA… (%)
…provided strong boost to CASA ratio
Source: Company, MOSL
Impressive traction in SA deposits, 2x rise in branch network to provide fillip
We expect SA deposits
accretion to remain
healthy at a CAGR of
17% over FY12/15.
17 January 2013
With a revamp in its deposit-taking strategy, ICICIBC started refocusing on the branch
banking model instead of agency model followed earlier. Coupled with it, an increase
in branch network by 2x+ over FY08 to 2,700+ helped it increase the proportion of
retail deposits in its book. SA deposits’ growth rebounded sharply to ~28% over FY10/
11, against 5% in FY09 (though partially led by the financial crisis). Consequently,
percentage of SA deposits to total deposits increased to 30%, against 16% in FY08. We
expect SA deposits accretion to remain healthy at a CAGR of 17% over FY12/15.
19

20. ICICI Bank
SA deposit growth remains healthy
Sharp rise in proportion of SA deposits in overall deposits (%)
SA deposit growth lower than peers, but should be seen in the context of lower balance sheet growth as well (%)
(SA deposit growth)
(Balance sheet growth)
Source: Company, MOSL
Maturing branch network to aid CASA mobilization
Incremental contribution
from new branches are
expected to increase
significantly as they ride
through the cycle of
maturity
Due to a strong expansion in branch network, ICICIBC’s CASA per branch declined
from INR734m in FY07 to INR420m in FY12 and remained low compared to AXSB’
INR607m and HDFCB’s INR527m. We note that the high difference in CASA per branch
is due to CA per branch, while the difference in SA deposit per branch is lower, with
SA deposits per branch for ICICIBC at INR288m per branch as against INR326m for
HDFCB and INR343m for AXSB. With nearly ~15% of the branch network less than 1824 months old (excluding branches from merger of BoR), incremental contribution
from these branches are expected to increase significantly as they ride through the
cycle of maturity. Further, the bank has guided for balance sheet growth to be in line
with industry/marginally above industry average, which should help it sustain a CASA
ratio at ~40%.
Merger of Bank of Rajasthan (BoR): ICICIBC merged BoR which had a branch network of 463 and total business of INR230b with
itself in August 2010. Over 60% of 463 BoR’s branches were in the state of Rajasthan which would provide ICICIBC a strong hold
in that region. Compared to ICICIBC, erstwhile BoR’s branches were grossly underutilized. BoR’s business per branch was
INR505m, compared to ICICIBC’s INR2.2b. With concentrated presence in northern India, ICICIBC would be able to benefit in the
longer time horizon.
17 January 2013
20

21. ICICI Bank
Strong branch expansion and moderation in business led to
decline in CASA per branch (INR m)
CASA per branch low against peers’
expect improvement (INR m)
Bank resorted to organic and inorganic expansion
Branch addition remain strong (addition during the year)
CA
CAGR o
o
GR
f 30
%
f 22%
* HDFC merger with CBOP; # ICICIBC merger with Bank of Rajasthan
17 January 2013
Source: Company, MOSL
21

22. ICICI Bank
Loan growth revives – retail loan to gather momentum
Higher capitalization to ensure dilution-free growth



After a period of consolidation over FY08-10, the bank resumed on the growth path with a
loan CAGR of 18% over FY10/12. Initial phase of growth was driven by domestic corporate
loans (+36%); but in the past few quarters, retail segment too picked up with the entire
secured segment in retail showing signs of improvement.
Further, a drag on overall loans due to winding up of unsecured loans would be lower, with its
proportion to overall loans now being insignificant.
For FY12-15E, domestic loan growth is expected to post a CAGR of 20%+ and international loan
portfolio is expected to clock a CAGR of 15%. This would be supported by strong capitalization,
with CAR at 19% (of which Tier I is at 12.5%+). Further repatriation of capital from subsidiaries
and release of capital from insurance venture shall ensure dilution-free growth till FY16E.
Domestic loan CAGR to remain healthy at 20%+ over FY12-15E
The near term loan
growth driver would be
corporate loans however
an increasing momentum
in all segments of
secured retail portfolio is
positive
Post consolidation over FY08-10, ICICIBC’s trend on the growth path was led by a
strong growth in corporate segment, which reported a CAGR of ~36% over FY10-12
compared to overall loan growth of 18%. The other key drivers for growth were SME
(36%+, albeit on a lower base) and CV loans (higher share of bought portfolio 19%+).
While the near term driver would continue to be corporate loans (working capital
loans and disbursements from past sanctions), increasing momentum in all segments
of secured retail portfolio is positive. We expect domestic loan CAGR to be at 20%+
over FY12-15E. Growth in international segment is likely to be opportunistic and we
factor 5% growth in FY13E and to be largely in line with overall growth for FY14E/15E.
Loan growth improves, expect to be in line with industry average Expect share of retail loans to stabilize (%)
Post consolidation, ICICIBC resumed on the growth path led by a growth in corporate segment
Source: Company, MOSL
Decline in share of retail loans to overall loans likely to be arrested
Retail loans to grow 1718% over FY12/15, against
5% CAGR over FY10-12
17 January 2013
Led by higher repayments/writeoffs, retail loans declined by 15% CAGR over FY09-12
and at end-2QFY13 it formed ~34% of the overall loans, against 58% in FY08. Within
the retail segment, unsecured retail loan registered the sharpest fall of 40%+ over
FY09-12. However, in the past three quarters, loan book has stabilized indicating the
22

23. ICICI Bank
negative drag of it on overall loans seems to be limited in the future. Within retail,
growth in housing loan and auto/CV loan resumed to ~15% YoY in 1HFY13 (against a
decline of ~33% over FY08-10). We expect retail loans to grow 17-18% over FY12/15,
against 5% CAGR over FY10-12.
Growth in retail segment moderates (YoY, %)
Decline in unsecured personal loan has been arrested (%)
Drag on retail growth due to unsecured retail proportion behind, while housing and auto loan growth has improved in YTDFY12. With a
reversal in interest rate cycle and management focus, expect it to improve further
Source: Company, MOSL
17 January 2013
23

24. ICICI Bank
Healthy core profitability; RoA's improved decisively
Valuations at LPA; will evolve as RoE's improve over next two years



Structural drivers for strong core operations (1) margin improvement (2) stable cost to average
assets and (3) healthy asset quality performance (though factored higher credit cost) should
enable bank to deliver core PBT of 2% - highest in last decade.
Fee income growth though is expected to improve, is conservatively factored in at lower than
balance sheet growth (CAGR of 13% v/s balance sheet CAGR of 17%), leading to negative carry
on RoA's.
RoA's have improved decisively and with increasing leverage, core RoE to improve to 17%+ by
FY15E. Further, with stock trading at LPA, we expect valuations to evolve as growth visibility
improves and RoE's increase.
Structural improvements to aid core operating profit; NIMs expected to
remain healthy, to drive core operating profit
In our view, structural drivers for strong operations are in place and the bank would
maintain core operating profit at 190bp+ over FY13E-15E. Though expected
improvement in NIMs and stable credit cost shall drive core operating profit, continued
pressure in fee income would negate the benefit to some extent. Further cushion to
RoA would be provided by improved contribution from non-core income (trading
gains and dividend from subs), which is expected to improve from just 18bp in FY12 to
30bp+ by FY15E.
Core PBT (as a % of average assets) to remain healthy
Despite moderation in
risk adjusted core
income, strong control
on opex kept core
profitability healthy over
FY08-10. Further increase
was led by strong
improvement in RAM
Source: Company, MOSL
Excess flab already shed; fee income growth to improve and its drag on
RoA to reduce
Factoring in fee income
growth of 18% in FY14/15 ,
however with recovery in
macro-economic
environement, corporate
fees could provide
upside
17 January 2013
Commendable performance over cost helped the bank absorb impact of lower RAM
and muted fee income growth, thus keeping core-PBT largely stable at 90bp over
FY08-10. However, in our view, ICICIBC has utilized the benefit of cost reduction and
it is unlikely to drive RoA higher. With increasing branch presence, growing share of
retail business and higher employee base, we assume operating expense to register
17% CAGR over FY12-15E. However, cost to average assets ratio is expected to remain
stable at ~1.8% over FY13E/15E.
24

25. ICICI Bank
Fee income to average assets, cost to average assets ratios expected to remain stable
ICICIBC has utilized the
benefit of cost reduction
and it is unlikely to drive
RoA higher
Source: Company, MOSL
Valuations will evolve as RoE's improve over next two years
RoA's have improved
decisively and increasing
leverage would be a key
for RoE improvement
While RoA's has improved decisively to 1.5%+, lower leverage restricted improvement
in RoE. The bank has a CAR of 18.3%, with Tier I at 12.8%, which implies it is currently
under-leveraged (core) at 9.5x, compared to 11.x for HDFCB and 12.6x for AXSB. Going
forward, balance sheet size is expected to post a CAGR of 16%+ over FY12/15E and we
expect core leverage to increase to 11x. Increasing leverage would drive RoE's higher
to 17%+. Further, with ICICIBC trading at near LPA BV multiple, we expect valuations
will evolve as bank continue to deliver higher RoE's. Maintain Buy with a TP of 1,400.
ICICI Bank: SOTP FY15E
ICICI Bank
Total
Value
INR b
1,334
Key Ventures
ICICI Pru Life Insurance
ICICI Bank Canada (100% Subsidiary)
ICICI Bank UK (100% Subsidiary)
ICICI Home Finance (100% Subsidiary)
ICICI Pru Asset Management (51% stake)
ICICI Securities
ICICI Lombard General Insurance (74% stake)
ICICI Ventures
ICICI Securities PD
Total Value of Ventures
Less: 20% holding Discount
Value of Key Ventures
Target Price Post 20% Holding Co. Disc.
Current Value
Upside - %
Target Price w/o 20% Holding Co. Disc.
CMP (INR)
Upside - %
159
52
34
32
19
14
19
10
10
348
70
278
1,612
1,341
20.3
1,682
1,341
25.4
Total Value per
Value
Share
USD b
INR
24.3
1,157
2.9
0.9
0.6
0.6
0.3
0.3
0.3
0.2
0.2
6.3
1.3
5.1
29.4
24.5
20.3
30.7
24.5
25.4
138
45
29
28
16
12
16
9
9
302
60
241
1,399
1,163
20.3
1,459
1,163
25.4
% of
Total
Value Rationale
82.7 2x FY15E BV ex Investment in key ventures;
Implied 12.4x core EPS
9.8
3.2
2.1
2.0
1.2
0.9
1.2
0.6
0.6
21.6
4
17.3
100
Apprisal Value; 74% Economic stake
1x FY15E BV
1x FY15E BV
2x FY15E BV
Valued at 4% of Total AUM exp in FY15
12x FY15E PAT
1x FY15 Networth
10% FY15E AUMs
1x FY15 Networth
Source: MOSL
17 January 2013
25

26. ICICI Bank
RoA improvement to be driven by core operating performance (%)
Y/E March
FY04
FY05
FY06
FY07
FY08
FY09
FY10
FY11
FY12
FY13E
FY14E
FY15E
Net Interest Income
Fee income
Core Operating Income
Operating Expenses
Employee cost
Other operating expenses
Core operating Profits
Non Core Other Income
Operating Profits
NPA provisions
Other Provisions
Provisions
PBT
Tax
RoA
1.92
1.11
3.03
2.42
0.47
1.95
0.61
1.53
2.14
0.40
0.10
0.50
1.64
0.23
1.41
2.13
1.50
3.64
2.51
0.50
2.01
1.13
0.89
2.02
-0.08
0.38
0.29
1.73
0.36
1.37
1.86
1.65
3.51
2.39
0.52
1.87
1.12
0.73
1.86
0.38
0.00
0.38
1.48
0.27
1.21
1.89
1.68
3.57
2.24
0.54
1.70
1.33
0.64
1.97
0.48
0.27
0.75
1.22
0.18
1.04
1.96
1.78
3.74
2.19
0.56
1.63
1.55
0.59
2.14
0.68
0.10
0.78
1.36
0.24
1.12
2.15
1.67
3.82
1.81
0.51
1.30
2.01
0.28
2.29
0.96
0.01
0.98
1.31
0.35
0.96
2.19
1.52
3.71
1.58
0.52
1.06
2.13
0.49
2.62
1.17
0.01
1.18
1.44
0.36
1.08
2.34
1.67
4.01
1.72
0.73
0.99
2.29
0.06
2.35
0.51
0.08
0.59
1.76
0.42
1.34
2.44
1.52
3.96
1.78
0.80
0.99
2.18
0.18
2.36
0.23
0.13
0.36
2.00
0.53
1.47
2.75
1.39
4.14
1.82
0.83
1.00
2.32
0.30
2.62
0.36
0.04
0.40
2.22
0.60
1.62
2.90
1.42
4.32
1.84
0.84
1.00
2.48
0.33
2.80
0.38
0.06
0.43
2.37
0.64
1.73
2.91
1.40
4.32
1.81
0.84
0.97
2.51
0.31
2.82
0.38
0.06
0.44
2.37
0.63
1.74
DuPont Comparison with peers (%)
Axis Bank
Average
FY04-07
FY08-12
1)
2)
3)
4)
5)
Net Interest Income
2.4
Fee income
1.2
Fee to core Income
34.1
Core operating Income
3.6
Operating Expenses
1.9
Cost to Core Income
53.3
Employee cost
0.6
Other operating expenses 1.3
Core Operating Profits
1.7
Trading and others
0.6
Operating Income
2.2
Provisions
0.5
NPA provisions
0.4
Other Provisions
0.1
PBT
1.7
Tax
0.6
Tax Rate
34.2
RoA
1.1
3.0
1.8
37.4
4.8
2.3
47.8
0.8
1.5
2.5
0.4
2.9
0.6
0.5
0.1
2.2
0.8
34.2
1.5
FY13-15E
3.2
1.8
36.1
4.9
2.3
45.5
0.8
1.4
2.7
0.3
3.0
0.5
0.5
0.1
2.5
0.8
32.5
1.7
HDFC Bank
Average
FY04-07
FY08-12
3.7
1.6
30.4
5.3
2.5
48.2
0.7
1.8
2.7
0.0
2.7
0.7
0.6
0.1
2.0
0.6
30.5
1.4
4.3
1.8
29.3
6.1
3.1
50.3
1.2
1.9
3.1
0.1
3.2
1.0
0.7
0.3
2.2
0.7
31.5
1.5
FY13-15E
4.1
1.7
29.3
5.8
2.7
45.4
1.1
1.6
3.2
0.1
3.3
0.5
0.4
0.1
2.8
0.9
31.6
1.9
ICICI Bank
Average
FY04-07
FY08-12
2.0
1.5
43.2
3.4
2.4
69.6
0.5
1.9
1.0
0.9
2.0
0.5
0.3
0.2
1.5
0.3
17.0
1.3
FY13-15E
2.2
2.9
1.6
1.4
42.4
33.0
3.8
4.3
1.8
1.8
47.2
42.9
0.6
0.8
1.2
1.0
2.0
2.4
0.3
0.3
2.4
2.7
0.8
0.4
0.7
0.4
0.1
0.1
1.6
2.3
0.4
0.6
24.1
26.8
1.2
1.7
Source: Company, MOSL
Comments 1): NII to average assets has improved, but remains low compared to peers due to higher share of international
portfolio. Domestic margins are at ~3.4%.
Comments 2): Fee income contribution to RoA lower than peers. Faster than expected economic recovery, leverage on strong
corporate relationship and improving growth in retail loan would gradually improve fee income contribution
Comments 3): Strong control on opex resulting in best-in-class cost to average asset ratio
Comments 4): Strong asset quality performance over past two years is commendable
Comments 5): RoAs has improved decisively and is now best in the class
17 January 2013
26

27. ICICI Bank
ICICIBC: One-year forward PBV and RoE
ICICIBC: One-year forward PE and RoA
ICICIBC: One-year forward PBV
ICICIBC: One-year forward PE
17 January 2013
27

28. ICICI Bank
Financials and Valuation
Income Statement
NII CAGR of 23%+ over FY1315E on back of higher margins
and improving loan growth
Fee income growth to improve
On a higher base, PAT CAGR of
23% over FY12-15
(INR Million)
Y/E March
2010
Interest Income
257,069
Interest Expended
175,926
Net Interest Income
81,144
Change (%)
-3.0
Other Income
74,777
Net Income
155,920
Change (%)
-2.4
Operating Exp.
58,598
Operating Profits
97,322
Change (%)
9.0
Provisions & Cont.
43,869
PBT
53,453
Tax
13,203
Tax Rate (%)
24.7
PAT
40,250
Change (%)
7.1
Dividend (Including Tax)
15,020
Core PPP*
85,512
Change (%)
0.8
*Core PPP is (NII+Fee income-Opex)
2011
259,741
169,572
90,169
11.1
66,479
156,648
0.5
66,172
90,475
-7.0
22,868
67,607
16,093
23.8
51,514
28.0
18,170
92,625
8.3
2012
335,427
228,085
107,342
19.0
75,028
182,369
16.4
78,504
103,865
14.8
15,830
88,034
23,382
26.6
64,653
25.5
21,228
103,995
12.3
2013E
404,434
266,458
137,977
28.5
84,902
222,879
22.2
91,484
131,395
26.5
20,008
111,387
30,075
27.0
81,313
25.8
28,541
125,895
21.1
2014E
456,258
288,261
167,997
21.8
101,331
269,328
20.8
106,877
162,450
23.6
25,194
137,257
37,059
27.0
100,197
23.2
35,169
154,950
23.1
2011
15,018
11,518
3,500
539,391
554,409
550,909
2,256,021
11.7
1,016,465
20.7
1,092,043
159,864
4,062,337
340,901
1,346,860
11.4
2,163,659
19.4
47,443
163,475
4,062,337
2012
15,028
11,528
3,500
592,525
607,552
604,052
2,555,000
13.3
1,110,194
9.2
1,398,149
175,770
4,736,471
362,293
1,595,600
18.5
2,537,277
17.3
46,147
195,154
4,736,471
2013E
15,028
11,528
3,500
645,297
660,324
656,824
2,980,269
16.6
1,240,225
11.7
1,461,891
192,684
5,295,169
393,353
1,715,270
7.5
2,945,821
16.1
45,571
195,154
5,295,169
2014E
15,028
11,528
3,500
710,325
725,352
721,852
3,595,791
20.7
1,451,924
17.1
1,742,093
230,538
6,293,773
484,987
1,972,561
15.0
3,555,546
20.7
46,495
234,185
6,293,773
Balance Sheet
Strong capitalization to ensure
dilution free growth
SA growth to remain healthy at
17%+ over FY13/15 and CASA
ratio to be strong at 39%+
Loan growth to improve led by
healthy growth in domestic
operations
Y/E March
Share Capital
Equity Share Capital
Preference Capital
Reserves & Surplus
Net Worth
Of which Equity Net Worth
Deposits
Change (%)
Of which CASA Deposits
Change (%)
Borrowings
Other Liabilities & Prov.
Total Liabilities
Current Assets
Investments
Change (%)
Loans
Change (%)
Net Fixed Assets
Other Assets
Total Assets
(INR Million)
2010
14,649
11,149
3,500
505,035
519,684
516,184
2,020,166
-7.5
842,158
34.4
939,136
155,012
3,633,997
388,737
1,208,928
17.3
1,812,056
-17.0
32,127
192,149
3,633,997
Asset Quality
GNPA (INR m)
NNPA (INR m)
GNPA Ratio
NNPA Ratio
PCR (Excl Technical write off)
E: MOSL Estimates
17 January 2013
2015E
544,608
343,127
201,481
19.9
118,395
319,876
18.8
125,093
194,784
19.9
30,732
164,052
43,474
26.5
120,578
20.3
42,323
187,284
20.9
2015E
15,028
11,528
3,500
788,580
803,608
800,108
4,394,202
22.2
1,699,998
17.1
2,058,712
276,151
7,532,673
599,633
2,268,445
15.0
4,334,655
21.9
48,918
281,022
7,532,673
(%)
94,807
38,411
5.1
2.1
59.5
100,343
24,074
4.5
1.1
76.0
94,753
18,608
3.6
0.7
80.4
101,527
19,526
3.4
0.7
80.8
115,520
24,599
3.2
0.7
78.7
135,970
31,768
3.1
0.7
76.6
28

29. ICICI Bank
Financials and Valuation
Ratios
Gradual improvement in
margin to continue, domestic
margin at historical high of
3.4%+ in 2QFY13
RoA's has improved decisively
to 1.6%+, increasing leverage
to boost RoE's to 17%+
Cost to income ratio expected
to decline gradually
Adequately capitalized till FY16
Y/E March
Spreads Analysis (%)
Avg. Yield - Earning Assets
Avg. Yield on loans
Avg. Yield on Investments
Avg. Cost-Int. Bear. Liab.
Avg. Cost of Deposits
Interest Spread
Net Interest Margin
2010
2011
2012
2013E
2014E
2015E
7.9
8.7
5.8
5.2
5.5
2.7
2.5
7.7
8.3
6.2
4.8
4.7
2.9
2.7
8.5
9.4
6.6
5.7
5.9
2.8
2.7
8.9
10.1
6.7
5.8
6.3
3.1
3.0
8.6
9.6
6.7
5.4
5.9
3.2
3.2
8.6
9.6
6.7
5.6
5.8
3.0
3.2
8.0
9.6
1.1
68.4
48.0
9.7
11.5
1.3
65.3
42.4
11.3
12.8
1.5
68.0
41.1
13.1
14.6
1.6
65.9
38.1
14.7
16.1
1.7
63.2
37.6
16.0
17.2
1.7
63.0
37.0
40.7
32.9
99.8
9.8
41.7
42.6
72.4
9.0
43.0
44.8
81.6
11.1
42.1
45.3
88.9
13.1
40.8
45.8
98.8
15.1
40.0
46.2
112.8
17.1
89.7
41.7
59.8
56.6
19.4
14.4
95.9
45.1
59.7
47.6
19.5
13.2
99.3
43.5
62.5
54.5
18.5
12.7
98.8
41.6
57.6
53.3
17.6
12.2
98.9
40.4
54.9
57.6
15.8
11.2
98.6
38.7
51.6
58.3
14.2
10.3
Book Value (INR)
463.0
BV Growth (%)
5.1
Price-BV (x)
ABV (for Subsidaries) (INR)
353.6
ABV Growth (%)
6.6
Price-ABV (x)
ABV (for Subs Invst & NPA) (INR) 329.5
Adjusted Price-ABV (x)
EPS (INR)
36.1
EPS Growth (%)
6.9
Price-Earnings (x)
Adj. Price-Earnings (x)
Dividend Per Share (INR)
12.0
Dividend Yield (%)
E: MOSL Estimates
478.7
3.4
516.6
7.9
2.3
408.6
10.2
2.4
397.3
2.5
56.1
25.4
20.7
17.5
16.5
1.4
562.4
8.9
2.1
454.3
11.2
2.1
442.5
2.2
70.5
25.8
16.5
13.7
21.2
1.8
618.8
10.0
1.9
510.8
12.4
1.9
495.8
1.9
86.9
23.2
13.4
10.9
26.1
2.2
686.7
11.0
1.7
578.6
13.3
1.6
559.3
1.6
104.6
20.3
11.1
9.4
31.4
2.7
Profitability Ratios (%)
RoE
Adjusted RoE
RoA
Int. Expended/Int.Earned
Other Inc./Net Income
Efficiency Ratios (%)
Op. Exps./Net Income*
Empl. Cost/Op. Exps.
Busi. per Empl. (INR m)
NP per Empl. (INR lac)
* ex treasury
Asset-Liability Profile (%)
Loan/Deposit Ratio
CASA Ratio %
Invest./Deposit Ratio
G-Sec/Invest. Ratio
CAR (BASEL II)
Tier 1
Valuation
Trading at near LPA P/BV, with
evolving RoE's over next two
years valuations should
improve; Top Pick
17 January 2013
370.6
4.8
356.0
44.7
23.9
14.0
29

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