Emkay Global Financial Services is bullish on ICICI Bank and has recommended accumulate rating on the stock with a target of Rs 1200 in its September 8, 2011 research report.
“ICICI Bank maintained its NIM’s guidance at 2.6% for FY12. However the improvement will largely accrue in the second half of FY12 as all the deposits will get fully reprised by October 2011 only. Hence there will be some pressure on the cost of funds in Q2FY12 and early Q3FY12. Moreover, cannibalization of savings deposits towards term deposits will add further pressure to the cost. The bank has increased its base rate by 200bps over last two quarters; however yield on advances has increased by just 70bps during the period. The management guided that all the floating advances get fully reprised by December 2011 only. Hence we may see margin improvement from Q3FY12 onwards.”
“Currently, ICICI banks international loan portfolio contributes 25% to the overall loan book. The margins on this book currently stand a lower 90bps . However, the bank is now acquiring incremental assets at higher spreads, and hence expects its FY12 NIM’s to improve to 1.25%. The bank expect it’s slippage rate to stablise at FY11 levels of 1.2%. The bank draws comfort from the fact that it has only ~5% of its exposure to SME and less than 3% exposure to unsecured retail portfolio, which normally throw concern in a rising rate scenario. Moreover its infra exposure is also relatively lower at 10%, as against 14-17% for other peers. Of the total infra exposure, power exposure is 4.5% with very small exposure to SEB’s.”
“The stock has corrected by ~20% YTD, on concerns of asset quality and overseas exposure. However we believe the concerns are overdone. Moreover at 1.8x/1.6x FY12E/FY13E standalone ABV, valuations do not look unreasonable with improving operating matrix. Maintain ACCUMULATE rating with TP of Rs 1200,” says Emkay Global Financial Services research report.
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