Shares of ICICI Bank surged nearly 9% to Rs 296 on the BSE after the bank reported a 188% year-on-year (YoY) rise in its March quarter (Q4) standalone net profit at Rs 2,025 crore. The private sector lender had logged profit of Rs 702 crore in the year-ago quarter.
Gross bad loans as a percentage of advances were at 7.89%, against 5.21% in the year-ago period. In the third quarter ended December 2016, the bank’s gross non-performing asset (GNPA) ratio was 7.20%.
“Prima facie, the asset quality deteriorated, with the Net NPA ratio jumped by 108 bps QoQ. However, out of the total slippages of Rs 11,289 crore, one single account from the cement sector contributed Rs 5,378 crore to the fresh NPA addition (added as per RBI’s instruction to banks). Adjusting for that one account, the rest of the slippages stood at Rs 5,911 crore, which was relatively lower than the previous few quarters’ slippage run-rate” said Sharekhan in its stock update.
The brokerage firm believes that the worst in terms of asset quality slippages is behind. The ICICI Bank management has guided that the pace of slippages in FY2018E will be slower compared to FY2017.
“We believe that H2FY2018E can see more meaningful improvements in asset quality, which will be important for the gradual re-rating of the stock (currently trading at 1.8x FY2019E ABV). We are upgrading our recommendation to ‘Buy’ from ‘Hold’ with a revised price target of Rs 320,” added the report.
“ICICI Bank has fully utilized the available floating (Rs 1,515 crore) and contingent provisions (Rs 1,528 crore) and has guided for significant moderation in slippages/provisions going ahead. We maintain BUY with price target of Rs 330 (1.5x FY19E ABV),” said analyst at Antique Stock Broking in Q4 result review.
At 09:24 am; the stock was up 5.7% at Rs 288 on BSE against 0.56% rise in the S&P BSE Sensex. The trading volumes on the counter more than doubled with a combined 16.39 million shares changed hands on BSE and NSE so far.