ICICI Bank Sum of the Parts Valuation

[chetan]

Morgan Stanley just released the new sum of the parts [SOTP] valuation of ICICI Bank and here is how it looks like,

Banking Business - 638
Life Insurance - 191
General Insurance - 25
ICICI Securities - 21
ICICI Ventures - 26
ICICI AMC of Mutual Funds - 22
ICICI Home Finance - 20
ICICI Securities PD - 6
ICICI Bank UK - 21
ICICI Bank Canada - 28

And the Base Case Target Price is Rs 1,000 as arrived above.

[sunil]

JP Morgan on ICICI Bank,

We believe ICICI Bank will have to choose between 20% loan growth and margin improvement, and indications from management are that it will be the latter. A major headwind to growth remains the international segment (25% of total book), which we do not expect to grow. Further, we think the domestic book is unlikely to grow by >20% if deposit quality is to be maintained.

We think consensus could fall by 5-10% in the next 2-3 quarters, and the disappointment cycle could begin as soon as 1Q results announcement in
mid-July. We cut EPS by 4-7% for FY11-12E, but our Mar-11 PT remains unchanged as we roll over to average FY11-12 book. We maintain our Neutral rating and a price target of Rs 950.

[sunil]

Goldman Sachs on ICICI Bank,

Key takeaways from the annual reports on international subsidiaries: (1) profit was up in FY10 due to: (a) lower provisions, (b) MTM benefits, (2) UK loan book grew 23%, while Canada and Eurasia declined 6% and 33%, (3) spreads reduced on higher funding costs and lower investment yields. In our view, spreads in international subs appear to be close to the bottom, but slower asset build up will likely continue to impact these subs.

We lower our FY11E-FY13E EPS for ICICI Bank by 10%/7%/6%, respectively, to factor in: (1) lower NII as its margin expansion will likely be limited on
rising bulk borrowings cost, (2) higher expenses as the bank expands branches (over and above Bank of Rajasthan’s (BoR) 427 in FY2011 and 400 in FY2012) and retail lending, (3) estimates for BoR, and (4) FY10 numbers from ICICI group’s and BoR’s annual reports.

We lower our 12-m SOTP-based TP to Rs925, from Rs935, to reflect earnings revision, higher book values for subs, and equity capital on BoR merger.