ICICI Bank Q2 Preview: NII may rise up to 20% YoY; margin, NPA trend eyed

In absolute terms, the NII may come in the range of Rs 10,711.9 crore to Rs 11,389 crore, say analysts

ICICI BANK Q2 Preview: Private lender ICICI Bank may report a strong operational performance for the July to September quarter of the current financial year (Q2FY22), with net interest income seen rising up to 22 per cent year-on-year (YoY), according to analysts’ estimates. 

The growth, they believe, will be supported by healthy loan growth and steady net interest margin (NIM). The bank is scheduled to announce its Q2 earnings on Saturday, October 23.

In absolute terms, the NII may come in the range of Rs 10,711.9 crore to Rs 11,389 crore, up 14.4 per cent to 21.6 per cent YoY, according to brokerages. Sequentially, however, this would be a tepid growth of up to 4 per cent.

"We are building in a 1.2 per cent quarter-on-quarter and 9 per cent YoY loan growth, and 2 basis point QoQ margin contraction, leading to NII growth of 14.4 per cent YoY," said analysts at global brokerage Nomura in their result expectation note.

The lender had reported NII of Rs 9,366.1 crore in the year-ago period (Q2FY21) and Rs 10,935.7 crore in Q1FY22. NIM projection, meanwhile, is between 3.87-3.9 per cent compared with 3.57 per cent YoY and 3.89 per cent QoQ.

Profitability, however, will be aided by stake-sale gains during the quarter, though muted growth in other income may cap the overall gain.

"We expect 9 per cent YoY growth in the pre-provision profit (operating profit) at Rs 9,004 crore, as the bank had stake sale gains of Rs 300 crore in Q2FY21. Further, we peg net profit at Rs 5,165.3 crore, up 21.5 per cent YoY," said Nomura.

At the lower end, IDBI Capital pegs PAT at Rs 4,557.1 crore, up 7.2 per cent YoY. Net profit was Rs 4,251.3 crore and Rs 4,616 crore in Q2FY21 and Q1FY22, respectively.

Loans and deposits

According to analysts, the Mumbai-based bank’s loan book is seen expanding 14.5-17 per cent YoY, up to Rs 762,200 crore. The deposits, meanwhile, are seen increasing 16.4 per cent YoY, up to Rs 969,800 crore, during the period under review.

"ICICI Bank has one of the lowest funding costs among peers, enabling it to underwrite profitable business. The steady mix of a high-yielding book, excess liquidity deployment, and low-cost liability franchise resulted in margin expansion to approximately 4 per cent in Q1FY22," said analysts at Motilal Oswal Financial Services (MOFSL).

With the healthy retail mix, supported by CASA ratio of nearly 46 per cent, retail contribution to fees of 78 per cent, and the retail loan mix increasing to 62 per cent, analysts at MOFSL believe the bank is firmly placed to deliver healthy sustainable growth, led by its focus on core operating performance.

As regards bad loans, analysts at Prabhudas Lilladher expect the bank’s numbers to be in-line with industry trends. Nomura, too, expects fresh slippages to decline sequentially from Rs 7,300 crore in Q1FY22 to Rs 4,700 crore in Q2FY22.

"Management commentary around collections, restructuring pool, behaviour of ECLGS loans and credit demand will be key," they said.

MOFSL has pegged gross NPA ratio at 5.5 per cent (vs 5.6 per cent QoQ and 5.2 per cent YoY), and NNPA at 1.3 per cent (vs 1.2 per cent QoQ and 1 per cent YoY).

At the bourses, ICICI Bank has outperformed the sectoral Nifty Bank index but marginally underperformed the benchmark Nifty50 index during the 3-month period, ACE Equity data show. The scrip rose 11 per cent between July and September on the NSE relative to Nifty Bank’s 7.6 per cent gain and Nifty50’s 12 per cent rally.