ICICI Bank Q4 preview: Analysts see up to 90% rise in PAT, fewer slippages

ICICI Bank is scheduled to announce its March 2019 quarter earnings for the financial year 2018-19 (Q4FY19) on Monday. Hopes are high that the bank will report strong net interest income (NII) on the back of healthy loan growth coupled with a decline in slippages. 

Sector analysts believe that the ICICI Bank could achieve this owing to strong credit growth in its retail and SME (small and medium enterprises) portfolio. 

“With a successive decline in the size of watch-list, controlled slippages from core portfolio and bottoming out of the non-performing loan (NPL) ratios over FY19, we expect the bank’s return profile to improve steadily,” analysts at Motilal Oswal said in their earnings preview note.

According to analysts’ estimates, the net profit (profit after tax) could increase up to 90 per cent year-on-year and be in the range of 15 to 21 per cent on a sequential quarter basis (q-o-q). 

While analysts at Phillip Capital expect the net profit to jump of 92 per cent y-o-y to Rs 1,954 crore in the recently concluded quarter, analysts at Centrum Capital peg the net profit at Rs 1,840 crore, up 80.4 per cent y-o-y. The bank had reported a profit of Rs 1604.9 crore in the quarter ended December 2018 (Q3FY19) and Rs 1,020 crore during Q4FY18. 

Net interest income (NII) is also expected to see a jump of about 20 per cent y-o-y to come within a range of Rs 7,100 crore to Rs 7,300 crore. 

“We expect the lender to report strong a 21.3 per cent YoY growth in NII, helped by healthy 15 per cent YoY growth in domestic loans and 27bps YoY expansion in net interest margin (NIM) to 3.1 per cent,” said analysts at Centrum Capital.

Slippages and NPAs

Analysts remain optimistic about the lender’s loan advances and believe that as most of the non-performing assets (NPAs) accounts are emerging from the “watch-list”, the bank is unlikely to report any significant jump in bad loan numbers.

Slippages from accounts under watch-list, total power sector exposure to companies with either A- rating or above and a relatively low concentration of deeply stressed assets are likely boost the prospects of lower NPA numbers.

“The pool of (relatively riskier) ‘BB’ and below-rated accounts is down to 0.9 per cent of loans relative to 1.2 per cent q-o-q. Pace of new NPA accretion has also moderated. Slippages are likely to remain lower in Q4FY19e. Overall, provisions are also expected to remain lower q-o-q,” said analysts at Centrum in their result preview note.

Consequently, slippages are estimated to be around Rs 2,100 crore, down 86 per cent YoY, from Rs 15,737 crore. These were Rs 2,091 crore in Q3FY19. Gross NPA ratio – ratio between gross NPA to gross loans advanced – is thus expected to be around 7.5 per cent. NNPA ratio is also expected to touch 2 per cent.  

Over the last one year, the lender has outperformed benchmark indices and has given higher returns than both Nifty50 and Nifty Bank. While the bank’s stock has jumped almost 43 per cent, Nifty Bank has gained around 16 per cent. Broader index Nifty50, however, has jumped only 9.4 per cent.