Overall brokerage houses expect ICICI Bank to report double digit growth in advances, largely driven by retail book.
The country's largest private sector lender, ICICI Bank, is likely to report a steep decline in the second quarter profit due to elevated provisions and weak treasury income, yet loan growth could support net interest income. Asset quality is expected to be stable with lower slippages and watchlist at the end of the September quarter.
The stock gained 1.8 percent year-to-date and rallied nearly 11 percent during the quarter on hopes of early resolution of Insolvency and Bankruptcy Code (IBC) cases.
Profit
Brokerage houses expect profit decline to be in the range of 35-88 percent YoY. The bank reported a loss of Rs 119.6 crore in the June quarter.
Among research firms, Kotak sees the highest fall of 88 percent YoY in profit. "We expect muted earnings led by higher provisions for bad loans and weak treasury (base had stake sale of Lombard Insurance)," the report said.
Axis Capital expects an earning de-growth on account of higher provisions, base impact (stake sale of Lombard) and elevated provisions. It said profit could decline 58 percent YoY while Emkay Research sees 35.5 percent decline.
Research firms expect operating profit of the bank to decline 15-32 percent YoY and other income to be lower on muted treasury gains, which are also expected to impact overall profitability.
Net interest income
Net interest income, the difference between interest earned and interest expended, is expected to grow 6-12 percent during the quarter YoY led by loan growth but pressure on the international book may limit growth.
"NII growth should hold up (12 percent YoY) as loan growth improves slightly. Domestic loan growth should be strong continued to be led by retail," Prabhudas Lilladher said, while Nomura expects NII growth to remain weak YoY at 6 percent due to pressure on the international book.
Loan growth
Overall brokerage houses expect double digit growth in advances, largely driven by the bank's retail book.
Motilal Oswal expects loan growth to come in at around 10 percent YoY. "Corporate loan growth would be moderate and international book would continue declining. Retail loans should continue exhibiting healthy growth," it said.
Emkay Research believes that growth should continue to be driven by retail assets. It expects CASA franchise to stay robust.
According to Axis Capital, there is slightly higher than industry loan growth (12-14 percent YoY) with slight pressure on margin.
Asset quality
Asset quality is expected to decline sequentially on fall in slippages, according to brokerage houses.
"We expect reduction in gross non-performing loans on the back of resolution of a few more IBC cases as well as write-offs. Watchlist may decline QoQ. Slippages are expected to be sharply lower at around 2.5 percent of loans," Kotak said.
Motilal Oswal, on the other hand, said gross slippages are expected to moderate from FY18 levels, but remain high (3.9 percent slippage ratio). "Net stress loans stand at 6.8 percent of loans and are expected to decline further as incremental stress addition moderates."
Nomura also expects slippages to continue to normalise to Rs 4,500 crore and expects some ramp up in provision cover translating to credit cost of 275bps.
The research house sees 19.4 percent YoY and 39.2 percent QoQ decline in provisions while Prabhudas Lilladher expects provisions to fall 6 percent YoY and 29 percent QoQ.
Key issues to watch out for- Movement of watch-list accounts
- Outlook on asset quality and trend on further relapse from restructured loans
- Resolution of power assets remains a key monitorable
- Managements' commentary on liquidity situation and expected LGDs in stressed book
