ICICI Bank hits all-time high; stock up 42% from July low

Shares of ICICI Bank hit an all-time high of Rs 366.20, up 1.5 per cent on Wednesday, extending its Tuesday’s 2.4 per cent gain on BSE.
 

The stock of private sector lender surpassed its previous high of Rs 365.65 recorded on January 29, 2018, in the intra-day trade. It has rallied 42 per cent from its 52-week low of Rs 257 hit on July 16 this year.

Post July-September quarter (Q2FY19) results, shares of the bank have outperformed the market by surging 16 per cent from Rs 315 on October 26, after the bank reported a better-than-expected results. In comparison, the benchmark Sensex has risen 5 per cent during the same period.

ICICI Bank got back in the black during September quarter, as it reported a profit of Rs 9.09 billion, beating Street estimates which was better-than-expected on net interest income (NII) growth of 12 per cent year-on-year (YoY), led by 11 basis points (bps) margin improvement and lower provisions requirement on much lower slippages. Asset quality improved on multi-quarter low slippages and decent recovery/upgrades with coverage improving to 59.5 per cent, up 470 bps quarter-on-quarter (QoQ).

Analysts at Prabhudas Lilladher believe recoveries/upgrades will gradually improve the asset quality with quality coverage ratio, while it should face limited risk on large slippage. Other metrics like CASA (current and savings account ratio) mix, fee growth and controlled opex (operational expenditure) remain positive but the quality of loan book on granularity is yet to take place, the brokerage firm said in a result update.

“ICICI Bank is in the midst of an improvement in the operating environment (stressed asset resolution and growth pick-up) and is showing healthy signs of earnings normalization. With challenges related to management transition getting addressed, the bank is now focusing on growing its core operating profits,” Motilal Oswal Securities said in results update. The brokerage firm reiterates ‘buy’ rating on the stock with a target price of Rs 400 per share.

“The performance continues to underlie the traction in recovery & stability in the core operating matrix. Headline loan growth numbers showed improvement as the quarter saw lesser drag from the stressed book and the healthy part continues to grow. Headline asset quality numbers improved with stable slippages in the non-stress portion and a positive surprise on an upgrade from the stress list. Plus, the banks limited exposure to IL&FS adds to the positivity,” according to analysts at Karvy Stock Broking.

“We estimate ROEs to improve to around 13 per cent in FY20E from around 3 per cent estimated in FY19E. With tier I estimated at 14.2 per cent in FY20E, financial leverage shall be an easy lever to improved ROEs from thereon,” the brokerage firm said. It has maintained STRONG BUY on the stock with the target price of Rs 440.