ICICI Bank, strong January 2012 stock performance unwound large part of the asset quality risks and despite robust asset quality reported, ICICI has underperformed peers mainly on low top-line momentum. Core fee growth (adjusted for dividends) has come off to 12%/7%/5% in Q1/Q2/Q3FY12, respectively. Also, loan growth adjusted for FX impact on international book has been weak at ~15%."
"Asset quality will continue to remain robust, with restructuring of Rs13-15bn expected in Q4FY12 in line with management guidance. Fee income growth adjusted for dividend from subsidiaries will continue to remain muted with flat YoY core fees expected in Q4FY12. Domestic and retail loan growth could pick up marginally but overall FX adjusted loan growth will remain muted."
"Near - term margin and asset quality outlook seem comfortable as absence of securitisation losses will aid margins by 10 - 15bps and low involvement in CDR pipeline cases will lead to lower restructuring, leaving top - line growth to be the key stock driver. We believe that low project finance and insurance - related fees in FY12 will create a very favourable base for FY13 fee income growth and though overall expectations of FY13 credit growth remains muted, some pick up in retail loan growth could help deliver respectable growth in FY13."
"ICICI has underperformed peers by ~15% post Jan/Feb - 12, mainly due to weak topline momentum. This was the key reason for our mid - Feb downgrade to ‘Accumulate’ from BUY (Target Price Rs 1000). We continue to believe in a re - rating for ICICI’s lending business due to improving core ROEs. However, stronger top - line momentum will be the key catalyst. Q4FY12 is unlikely to provide any positive surprise on top - line performance but a smaller base will most likely aid a recovery in FY13, especially in fee income," says Prabhudas Lilladher research report
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