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ICICI Bank Q2 preview: Slippages to remain elevated, PAT may drop over 70%

ICICI Bank is slated to release its September quarter earnings for FY19 on Friday. Key things to watch out for in today's results include movement of watch-list accounts, outlook on asset quality and trend on further relapse from restructured loans and resolution of power assets.

Also, since the appointment of Sandeep Bakhshi as MD & CEO for tenure of five years has put to rest leadership concerns, the investors' focus will shift towards growth and NPA resolution and other operational / financial parameters, say analysts. 

Though the bank is expected to post steady growth in loans, led by strong growth in domestic loan portfolio, it is likely to report huge drop in its PAT (profit after tax), which according to analysts at Sharekhan, could drop 68 per cent YoY to Rs 6.65 billion. Motilal Oswal Securities, on the other hand, peg the PAT at Rs 4.8 billion for the recently concluded quarter, down 77 per cent. 

The bank had reported its first-ever loss amounting to Rs 1.2 billion for the June 2018 quarter (Q1FY19) as provisions for bad loans doubled. On a standalone basis, the bank's net interest income (NII), or the interest earned minus interest expended, rose 9.2 per cent on a year-on-year (YoY) basis to Rs 61.02 billion during the same period. 

For July-September period, the bank is likely to report double-digit growth in loans. Motilal Oswal Securities says, "We expect loan growth to come in at nearly 10 per cent YoY. Corporate loan growth would be moderate and international book would continue declining. Retail loans should continue exhibiting healthy growth."

Edelweiss Securities says NIMs (net interest margins) will be lower QoQ as last quarter had one-offs. Slippages would be elevated given the flow from existing stress pool. It also said that some pressure can also emanate from power sector. Credit cost will also be elevated as coverage rises. 

Margins should be largely steady but other income is likely to be muted. Some relief on provisions is expected as investment on mark to market (MTM) will be much lower than the last quarter, Prabhudas Lilladher says.  On a year-to-date (YTD) basis, ICICI Bank's stock has risen about 0.5 per cent. In comparison, the S&P BSE Sensex has dropped nearly 2 per cent.


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