ICICI Bank gains 4% post June quarter results

ICICI Bank has moved higher by 4% to Rs 306, extending its past two days 6.5% gain on the BSE, as analyst retained ‘buy’ rating on the stock with upside 12-month target price in the range of Rs 347 to Rs 370.

ICICI Bank has reported a net loss of Rs 1.2 billion in the first quarter of the financial year 2018-19 (Q1FY19), on higher provisions for bad loans and treasury losses. The bank miss in an average net profit estimate of Rs 10 billion, due to 129% year on year (yoy) increase in provisions during the quarter to Rs 59.71 billion.

Its net interest income (interest earned minus interest expended) grew 9.2% yoy at Rs 61.02 billion as against Rs 55.90 billion in Q1FY18. The overall net interest margin or NIM for the quarter came at 3.19% as against 3.2% qoq, (declined by 1bps).

Its gross non-performing assets (GNPA) for Q1FY19 decreased 3bps to 8.81% against 8.84% qoq. Net NPA for the quarter came at 4.19% against 4.77% qoq, which has declined by 58bps.

Business performance continued to be healthy with a 15.1% yoy growth in domestic credit led by retail loans (20% yoy). The share of retail loans rose to around 57.5% of domestic advances against around 53.3% last year whereas CASA deposit share was at 50.5%.

“ICICI Bank management has guided for a further improvement in Provision Coverage to 70% against 54% currently which will keep overall credit costs at elevated levels at least during FY19. However considering healthy coverage for specific portfolio, NCLT 1 – 88% coverage and NCLT 2 – 61% coverage, we may expect a positive surprise to earnings,” analysts at Emkay Global Financial Services said in result update. The brokerage firm maintains ‘buy’ rating on the stock with a 12-month target price of Rs 362 per share.

“In our view, RoA and RoE of the standalone bank would recover sharply in FY20 itself. The key drivers will be a gradual acceleration in core revenue growth, sustained focus on cost productivity and a steep reduction in credit cost. Robust capitalization, enviable deposit franchise and realization/de-risking of the balance sheet are key positives about the bank,” IIFL Wealth Management said in result update with price target of Rs 370 per share.