ICICI Bank Q2 preview: Analysts eye double-digit loan growth, asset quality

Minimal increase in stressed assets, steady slippages, and robust loan growth could make ICICI Bank stand as an outlier among its lending peers for the September quarter results. The bank is scheduled to report its Q2FY20 earnings on Saturday, October 26.

“ICICI Bank will likely be an outlier with lower asset quality issues, steady slippages and very limited additions to stress book” wrote analysts at Prabhudas Lilladher in a results preview note.

They believe a better-than-industry loan growth figure, supported by retail and domestic growth could push the bank’s net interest margin (NIM) slightly upwards. A 14.2 per cent year-on-year (YoY) loan growth at Rs 6.2 lakh crore could take the NIM to 3.68 per cent, while reducing credit cost by 125 bps to 1.68 per cent, they say. The loan book in Q2FY19 and Q1FY20 stood at Rs 5.44 lakh crore and Rs 5.92 lakh crore, respectively.

“ICICI has minimal exposure to the most talked-about stressed groups. This, coupled with high coverage, should lead to normalisation of credit cost,” said analysts at Edelweiss Securities.

Moreover, the gross non-performing asset (GNPA) ratio is pegged at 6.12 per cent for the recently concluded quarter, down from 8.54 per cent reported in the corresponding quarter of the previous fiscal and 6.49 per cent in Q1FY20.

NET INTEREST INCOME AND PROFIT

Analysts at HDFC Securities expect the net interest income (NII) to grow nearly 24 per cent on the back of healthy loan growth. The brokerage pegs the NII at Rs 7,950 crore, up from Rs 6,417.6 crore reported in Q2FY19, for the recently concluded quarter. The NII in the previous quarter of the current fiscal stood at Rs 7,737.4 crore.

As for profits, analysts on average, believe the private lender’s PAT could come in between Rs 2,224.8 crore and Rs 2,769.3 crore, up 144 to 205 per cent YoY. The bank’s net profit was Rs 908.9 crore in the September quarter of FY19 and Rs 1,908 crore in June quarter of FY20.

Analysts at Edelweiss Securities, however, expect the profit to decline 66 per cent YoY and 84 per cent QoQ due to one-time mark-down of deferred tax asset (DTA) to Rs 310 crore.

Meanwhile, Reliance Securities peg the pre-provision operating profit (PPOP) at Rs 6,272.9 crore, up 19.5 per cent YoY, but down 0.2 per cent QoQ.

KEY MONITORABLES

Analysts would watch out for the management’s commentary on further additions, if any, to stressed assets, comments on insolvency and bankruptcy code (IBC) resolutions, margin outlook post linking of fresh retail loans to external benchmarks, and performance of the bank’s subsidiaries.

So far in calendar year 2019, the stock of the private lender has outperformed the benchmark S&P BSE Sensex by surging 26.5 per cent, as against an 8 per cent rise in the index.