ICICI Bank rises despite sharp fall in Q4 earnings

Last Updated: Tue, May 08, 2018 12:25 hrs
A security guard sleeps inside an automated teller machine (ATM) booth of ICICI bank in New Delhi

Mumbai: ICICI Bank has reported an almost 50% decline in net profit in the quarter ended March 2018, compared to year-ago quarter, and non-performing assets surged in the quarter.

But, the stock is up sharply on Tuesday, as the drop in earnings was on expected lines. More importantly, the amount of loans that could potentially turn bad, has fallen sharply to around Rs 4728 crore.

Several analysts and brokerages, including Morgan Stanley, CLSA and Credit Suisse continue to maintain a buy rating on the stock, although a few have cut the target price a bit.

The stock opened on a firm note at Rs 302.50 on BSE, up by about 4.5%, and advanced to Rs 312.40, gaining nearly 8%

On BSE, the ICICI Bank counter has clocked a volume of about 2.06 million shares so far in the session, more than 3.5 times the average daily volume of 5.67 lakh shares. On the National Stock Exchange, the counter has clocked a volume of about 48.5 million shares so far in today's session.

ICICI Bank announced after trading hours on Monday that it posted a net profit of Rs 1002 crore for the quarter ended March 2018, down from net profit of Rs 2002 crore in the year-ago quarter. A one-time income of about Rs 3320 crore the bank got from the sale of shares in ICICI Securities boosted the bank's earnings in the fourth quarter of fiscal 2017-18.

The bank has announced a dividend of Rs 1.50 per equity share of face value of Rs 2 each, subject to requisite approvals. The dividend on equity shares, will be paid/despatched on or after the same is approved by the shareholders at the ensuing Annual General Meeting to be held on August 10, 2018, the bank said in its filing to the stock exchanges.

The March-quarter performance was the bank's worst in the last two years. In the March quarter, the bank's asset quality deteriorated with Gross NPAs as a percentage of gross advances standing at 9.9%. In the preceding quarter, it was 8.55% and in the year-ago quarter it was 8.74%.

ICICI Bank expects net NPA to drop to 1.5% by end of financial year 2019-20. Currently it is at 4.8%. In the March 2018 quarter, provisions and contingencies increased to Rs 6625 crore, from Rs 2024 crore a year ago. The bank's net interest income was up marginally at Rs 6022 crore in the March 2018 quarter, from Rs 5962 crore in the year-ago quarter.

The bank has announced that it plans to de-risk its balance sheet by increasing the share of its retail portfolio in the overall loan book to over 60% by 2019-20, from 56.6% in 2017-18, and lowering the overseas share to below 10%.  

The bank is of the view that cases referred under the Insolvency and Bankruptcy Code will fetch a reasonable value, especially those of steel firms. These remarks appear to have cheered investors, as they indicate the bank would now be focusing on recovery.

The bank expects the consolidated return on equity to reach 15% by 2019-20, from 7.1% by June 2018. Capital adequacy stood at 18.42% as on March 31, 2018, against 17.39 a year ago.

With the increasing share of retail loans, the bank plans to increase its synergy with subsidiaries, especially insurance, asset management and capital market. “We are adopting a new approach for corporate lending with limits that would be based on customers’ ratings and past records,” said Chanda Kochhar the bank's CEO. The group’s limits were already lower than regulatory limits, she added.

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