Analysts say still like ICICI Bank

ICICI Bank witnessed three-folds jump in its fourth quarter net profit. At 1232 hours on Thursday, share price of ICICI Bank was trading at Rs 295.85 a piece on BSE, surging over Rs 23 or 8.47%.

Analysts at HDFC Securities said,"The profit was salvaged by 10 % growth in net interest income, improved net interest margins (NIMs) and lower provisions."

Net Interest Income stood at Rs 5,962.2 crore, which grew by 10.31% year-on-year (YoY) and 11.16% quarter-on-quarter (QoQ).

Meanwhile, provisions declined by 12.86% yoy at Rs 2,898.22 crore. While Gross non-performing assets (GNPA) expanded by 269 basis points at 7.9% in Q4 versus 5.21% a year ago same period.

Gross NPA of ICICI Bank has been consistently rising. In FY17, the GNPA grew by 208 basis points. 

Clyton Fernandes analysts at Systematix said, " We expect ICICIBC’s profitability over FY18e-19e to be robust, with a 1.6% RoA, led by robust business growth, better NIM and stable credit costs. We raise our target price for the standalone bank from Rs248 to Rs249.5, as we value it at 1.3x FY19e Book value (BV) (earlier 1.3x 1HFY19e BV)."

Analysts at Motilal Oswal pointed out key positives of the bank. They said, "Overall pool of stressed loans is showing signs of stability, and bulk of NPA recognition is happening from watch list and OSRL. Further expected measures by GoI/RBI for resolution of lumpy stressed loans provide comfort. Strong capitalization (tier I of 14.4%), significant improvement in granularity of book (~57% retail + SME) and sustained improvement in liability profile (helping to de-risk business)."

Manish Agarwalla, Pradeep Agrawal, Paresh Jain analysts at Phillips Capital said, "Likely upgrades in watch list and strong operating profit along with gain from stake in general insurance business will provide enough cushions to the bank to provide for the stress asset in next 1.5yrs time frame. We expect earnings of  ‐28.2%/+37% in FY18/FY19 translating into a RoA to 0.94% /1.16% respectively. "

"The bank is relying on the external factors such as the economy and government decisions for resolution of bad loans. It expects further deterioration in asset quality even as the pace of new additions to bad loans may reduce," HDFC Securities. 

Fernandes pointed few risk factors like sharp rise in credit costs due to sluggish economic recovery and more-than-expected increase in restructured bad loans for ICICI Bank further.