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ICICI Bank

ICICI Bank : The ICICI Bank's Q3FY09 performance on core operating front was in-line with our estimates.
In Q3FY09, net interest income (NII) and net profit showed flat growth of 1.6% and 3.4%, respectively.
With the strategy of lightening the Balance sheet and prioritizing capital conservation, the bank was able to achieve this on back of robust growth in treasury profit (Rs.9.76 bn in Q3FY09 vs. Rs.2.82 bn in Q3FY08) and 18.5% decline in total operating expenses (YoY).

Improving NIMs: NIM of the bank rose to 2.4% at the end of Q3FY09 from 2.3% at the end of Q3FY08.
Capital adequacy: The bank's capital adequacy at the end of Q3FY09 was 15.6% (including Tier-I capital adequacy of 12.1%) as against the regulatory requirement of 9.0%.
Asset quality: At the end of Q3FY09, the bank's net NPA (net of technical write-offs) stands at 2.07% of net customer assets, deteriorating from 1.50% in Q3FY08.
Gross NPA (net of technical write-offs) increased from Rs.64.75 bn at the end of Q3FY08 to Rs.89.88 bn at the end of Q3FY09. During the same period, net NPA (net of technical write-offs) increased from Rs.32.28 bn in Q2FY08 to Rs.44.0 bn in Q3FY09. We are factoring in higher slippage for FY09E and FY10E to take into account likely increase in NPA.

Considering earnings estimates for FY09E and FY10E, investors can BUY the stock with a target price of Rs.544, where the value of its standalone business comes to Rs.315 (P/ABV: 0.75x FY10E ABV) and the value of subsidiaries included here is Rs.229 (holding company discount: 30% to the fair value of its subsidiaries at Rs.327).