ICICI Bank 19 May 2010 4 Await further details; target price under review The key positives for ICICI Bank will be a 23% increase in the number of branches and a stronger network in North India. Over 60% of BoR’s 463 branches are in the state ofRajasthan and ~70% are in North India. BoR’s biggest competito rs in the state of Rajasthan are SBI’s subsidiary , State Bank of Bikaner and Jaipur (~750 branches), Bank of Baroda (~350 branches) and Punjab National Bank (~310 branches). However, the implied valuation of BoR at 4.8x trailing book value appears expensive, as the book needs to be adjusted for the re-assessment of BoR’s NPAs by ICICI Bank. The key near-term challenges for ICICI Bank will be assessment of BoR’s asset quality, rationalization and re- positioning of BoR’s branches, and possible regulatory issues. We will review our target price for ICICI Bank post the merger details. We maintain Buy. About Bank of Rajasthan Bank of Rajasthan (BoR) is an old generation private sector bank, with a domina nt presence in the state of Rajasthan. It has a network of 463 branches (including six service centers) and 111 ATMs (as of March 2009). Key operating parameters As of March 2009, BoR had a net worth of Rs10.45b, including revaluation reserves of Rs4.02b. Adjusted for revaluation reserves, its net worth is Rs6.43b. Deposit base is Rs152b, with a CASA ratio of ~27%. As of December 2009, loan book was ~Rs81b, up from Rs77.8b as of March 2009. GNPA ratio sto od at 2.8% and NNPA ratio stoo d at 1.1% in Dece mber 2009. However, NNP A (post tax) as a percentage of net worth (exc luding revaluation reserves) stood at ~10%. Tier-I CAR stood at 5.75% and total CAR stood at 11.29% as of December 2009. In 9MFY10, the bank reported a loss of Rs0.1b, as it acc ounted for the wage revision provision of Rs440m in its P&L statement. Deficit on account of pension liability stands at Rs520m, which the bank is yet to provide for. Branch addition, strongerNorth India network postamalgamation are key positives for ICICI BankWill review target price postthe merger details
