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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.

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