ICICI Bank surges 7% post Q4 results

The stock surged 7% to Rs 309 on the BSE after the private sector lender reported better than expected core operating performance.

ICICI Bank surged 7% to Rs 309 on the BSE after the private sector lender reported better-than-expected core operating performance.

The net profit of the bank almost halved to Rs 10.2 billion for the quarter ended March 2018,  as it set aside cash to cover a surge in bad loans, a fallout of the central bank’s revised scheme on resolution of stressed assets. It had profit of Rs 20.2 billion a year ago quarter.

“Upfront stress recognition, as anticipated, took the sheen off ICICI Bank’s otherwise operationally steady Q4FY18. Gross non performing loans (GNPLs) rose 1ppt to 8.8% due to elevated slippages (>12% run rate) primarily flowing from the drill down list and RBI’s restructuring schemes,” according to analysts at Edelweiss Securities.

The net interest margin improved to 3.24% in Q4 of 2018 compared to 3.14% in Q3 of 2018.

On the positive front, stress pool (ex‐ GNPLs) came off to <3% (>5% in Q3FY18). Moreover, core operating performance surpassed expectation—domestic loan growth of >15% with NIM improvement (despite higher stress) led to NII beat, it added.

The bank has been cautiously de‐risking its balance sheet and aims to step this up further by FY20 (unveiled new strategy). Pick up in growth, robust retail segment and moderation in credit cost (major stress recognition done) will enable ICICI Bank clock >15% RoE by FY20E, the brokerage firm said in result update with ‘buy’ rating on the stock with a 12-month target price of Rs 370 per share.