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ICICI Results: EPS growth consistently low, and even negative

ICICI Bank has announced Q3 results. EPS is up 4% on a standalone basis at 11.42 versus 10.99. Earnings Per Share – EPS – is really the only way to compare results, according to me. If a company can’t show growth in its Earnings Per Share, then there is a problem.

Let’s go one step ahead and assume some level of seasonality in ICICI’s results. So a better bet would be to calculate the Trailing Twelve Month (TTM) EPS for each quarter, and the corresponding growth in the TTM EPS (%).

I’ve used data from the ICICI investor site since Q1 FY 2004.

  • EPS growth has peaked at 20%, in Q3 2006. Remember that ICICI quoted at Rs. 1400 in Jan 08 – a P/E, then, of more than 30.
  • Since then the trend is downwards – with an intermediate high at 14% in the two quarters of April to September 2007.
  • TTM EPS growth has been negative for the last two quarters, with -0.62% in the september quarter, and -1.61% in December.
  • These results are not consolidated, but it seems to me that on a consolidated basis results are worse – at least for the last financial year and the first nine months of the year the consolidated EPS is lower than standalone. (In the December quarter, the consolidated EPS is Rs. 3 higher – or 30% more, though in September it was 30% lower)
  • At the current price of Rs. 363, the stock’s P/E is approximate 10. This may seem inexpensive if you have been in a coma since Jan 2008. Current PSU bank P/Es in India are 5 or so, for banks that have recently shown 50% EPS growth (like Canara Bank).

Capital intensive entities like banks cannot be valued at extremely high P/Es – the EPS will not quite grow that fast.

It’s more about what we THINK the bank will do in the future, rather than the trailing EPS. But think about it – did we not “think” the bank will do much better two years ago? In the last two years EPS growth has only dropped – and has been negative too. Going forward, where does this take us? I would expect a further drop in EPS after the India story unwinds, the bad loans finally appear, and credit growth drops alarmingly fast.

  • Anonymous says:

    >ICICI bank does seem to be deteriorating. In your opinion, will it be wise to keep our money with ICICI bank? I have recently opened a 10 year FD with ICICI and I do have another FD with SBI. Should I move entirely to SBI instead? Are our money safe with ICICI? What’s your gut feeling, please if you can share?

    Thanks.

  • Deepak Shenoy says:

    >Hey it’s not a solvency issue – so I doubt ICICI is insolvent or has a problem with being alive. Yes, it’s overpriced, but I don’t think you need to worry about it going down (if that is a problem then you should buy lots of rice, wheat and gold)

  • venkat says:

    >Deepak, any comments on the Tata Capital debenture issue?

  • Deepak Shenoy says:

    >Will come very soon, in the process of relocating

  • income.portfolio says:

    >DS:

    ICICI bank is going down. Any idea where the heck are they getting dividends for shareholder? EPS being negative, and they still sending dividend checks?

    I would agree with you, and don’t think they are on path of insolvency. Perhaps, 2-3 years of stress, then will be back in black with growth in economy.

    Best Regards,
    TIP