During the past four weeks, the stock of private sector lender has outperformed the market by surging 9.5 per cent on hopes of strong earnings in October-December quarter (Q3FY19). In comparison, the S&P BSE Sensex gave 2 per cent return during the same period.
Analysts expect ICICI Bank to report strong results for Q3 quarter, thereby supporting further re-rating.
“We increase our target price on ICICI to Rs 415 (from Rs 365) as we increase our multiple to 1.8x from 1.6x Sep-20 ABV and SoTP, mainly as we see this business cycle will lead to higher multiples unlike last two cycles which had effects from Retail (2005-2008) and corporate cycle (from 2012-2018) and discount to peer banks should narrow as earnings will see sharper recovery,” analysts at Prabhudas Lilladher said in an earnings preview.
ICICI Bank’s net interest income (NII) recovery should continue to be good in Q3FY19 as loan growth has improved including the loan buyouts from NBFCs, but PPOP (pre-provision operating profit) growth should be lower than NII as other income will remain tepid. The credit cost to slightly come off as slippages should be under control and asset quality should be stable, the brokerage firm added.
Reliance Securities expects ICICI Bank to report 39.6 per cent year-on-year (YoY) growth in its net profit at Rs 2,303 crore in Q3FY19. Net interest income (interest earned minus interest expended) is expected to grow 13 per cent at Rs 6,454 crore on YoY basis.
“We expect margins to rise led by higher loan growth and shift in pricing power. The bank’s treasury profits to rise in a declining interest rate environment, while operating efficiencies will continue during the period,” the brokerage firm said.
The board of directors of ICICI Bank is scheduled to meet on January 30, 2019, to consider the approval of audited financial results for the quarter and nine months ended December 31, 2018.