ICICI Bank Q2 net profit may rise 35% YoY on solid loan book, say analysts

ICICI Bank Q2 preview: Better credit growth, including for mortgages and unsecured loans, should drive up margins, leading to healthy core profitability, analysts said

ICICI Bank Q2 preview: Sandeep Bakhshi-led ICICI Bank could report around 35 per cent year-on-year (YoY) rise in net profit in the July-September quarter (Q2FY23), analysts expect. The bank, which is slated to report its quarterly earnings on Saturday, October 22, could also see high teen growth in its net interest income (NII), along with margin expansion.

Commentary on asset quality, traction in credit card and overall business, and general growth outlook, however, will be the key points to track, they said.

"Better growth, including for mortgages and unsecured loans, should drive up margins, leading to healthy core profitability," said analysts at Emkay Global Financial Services.

They expect the lender to report net profit of Rs 7,386 crore for the quarter under study, up 34 per cent YoY, and 7 per cent QoQ. At the most, consensus estimate pegs PAT at Rs 7,470 crore, a growth of 35.5 per cent YoY. ICICI Bank had posted net profit of Rs 5,511 crore in the corresponding quarter of the previous year (Q2FY22), and Rs 6,904.9 crore in the previous quarter of the current fiscal (Q1FY23).

Operationally, the lender's pre-provision profit (PPoP) could increase between 11 per cent and 16 per cent YoY, up to Rs 11,488.7 crore, from Rs 9,914.7 crore last year. Sequentially, this would be an improvement of up to 11 per cent from Rs 10,308.9 crore reported in Q1FY23.

NII, meanwhile, is projected to come anywhere between Rs 13,714.6 crore and Rs 14,260 crore, up in the range of 17 per cent to 22 per cent on year. NII was Rs 11,689.7 crore in Q2FY22, and Rs 13,210 crore in Q1FY23. Net interest margin (NIM), too, is seen breaching the 4 per cent-mark, rising 7-8 basis points YoY as well as QoQ, led largely by higher asset yields.

Loan book and asset quality

Brokerages also expect loan growth to be solid at around 21-23.5 per cent YoY, led by healthy contribution from all segments. Motilal Oswal Financial Services pegs its credit book at Rs 9.41 trillion, higher than the loan book of Rs 7.64 trillion seen last year, and Rs 8.95 trillion in the previous quarter.

Deposits, on the other hand, are expected to rise around 12 per cent YoY to Rs 10.96 trillion, up from Rs 9.77 trillion YoY, and Rs 10.5 trillion QoQ.

"We expect provisions to remain at low levels, given lower slippages, and better trends on recovery/upgradation. We are building slippages of 2 per cent (around Rs 4,500 crore) but we see a solid commentary on recovery to continue resulting in lower stress coming from asset-quality perspective," said Kotak Institutional Equities.

The brokerage expects provisions to decline 45 per cent YoY to Rs 1,487 crore from Rs 2,713.5 crore. Sequentially, however, it may increase around 30 per cent from Rs 1,143.8 crore. Provision coverage ratio (PCR) could, therefore, rise to 80.1 per cent from 79.9 per cent QoQ.

Gross non-performing asset (GNPA) ratio could likely ease to 3.2 per cent from 3.4 per cent QoQ, and NNPA could stay flat at 0.7 per cent.