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Strong show continues

Robust business momentum; PCR improves to 80%

* ICICIBC reported a strong 2QFY22, led by healthy NII growth (11bp NIM expansion), strong fee income trends, and controlled provisions. The bank reported a 5%/9% beat to our PPOP/net earnings estimate and is progressing swiftly towards earnings normalization.

* Business growth has picked up sharply, with domestic loans growing 4% QoQ, led by Business Banking (12%), Retail loans (5%), SME (11%). Most Retail segments showed a robust pickup, with Mortgage up 6% QoQ. A sharp recovery was seen in the Unsecured portfolio, with Personal loans/Credit Card growing by 6%/16% QoQ.

* On the asset quality front, fresh slippages declined to INR55.8b (2.9% annualized) v/s INR72.3b in 1QFY22. Higher recoveries and upgrades led to a 33bp/17bp QoQ decline in GNPA/NNPA ratio to 4.82%/0.99%. PCR improved to 80.3% – the highest in the industry. Restructured loans rose to INR96.8b (1.3% of loans) v/s INR48.6b (0.7% of loans) in 1QFY22.

* ICICIBC holds COVID-19 related provisions of INR64.25b (0.8% of loans), which gives us comfort on stable credit cost trends. We increase our estimates for FY22/FY23 by 5%/2.5% and project RoA/RoE of 2%/16.6% by FY24E. ICICIBC remains our top pick in the sector

Beat across all fronts; PCR touches 80% levels

* ICICIBC reported a robust performance, with PAT up 30% YoY to INR55b (9% above our estimate), aided by healthy NII growth, strong fee income trends, and controlled provisions. Additional COVID-related provisions stand at INR64.25b (0.8% of loans), similar to 1QFY22 levels. 

* NII growth was robust (up 25% YoY and 7% QoQ), led by a margin improvement (up 11bp QoQ) to 4% and an in line growth in advances (up 17% YoY and 4% QoQ).

* Other income came in 10% higher than our estimate, up 19% YoY to INR48b, led by strong fee income growth (21%). Retail, SME, and Business Banking contributed 78% to total fees. The bank reported treasury gains of INR3.97b (down 27% YoY). OPEX grew 28% YoY and 9% QoQ.

* PPOP grew 20% YoY, while core PPOP growth stood robust ~23% YoY

NII/core PPOP/PAT grew by 21%/23%/48% YoY in 1HFY22.

On the business front, advances growth picked up sharply (up 3.6% QoQ and 17% YoY), with domestic book up 19% YoY and 4% QoQ. Among segments, Business Banking grew 12% QoQ, Retail loans rose 5% (+20% YoY), SME segment also picked up strongly at 11% QoQ, while the Corporate book declined by 1% QoQ. Within Retail, robust growth was witnessed in Mortgages (up 6% QoQ). A sharp recovery was seen in the Unsecured portfolio, with Personal loans/Credit Card growing by 6%/16% QoQ, while CV declined by 1.2%. On the liability front, deposit growth was robust 17% YoY and 6% QoQ, led by CASA (up 24% YoY). Average CASA mix improved to 44.1% (+40bp QoQ).

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