ICICI Bank share: Buy or Sell? Stock tanks 2% today; banking risks remain but ICICI better than peers

On the non-performing assets front, the lender saw gross NPAs drop down to 6% last fiscal year, lowest in four years.

Private sector lender ICICI Bank’s shares slipped over 2%, making it one of the worst performing stocks on Thursday morning. Although the risks aligned with the banking sector in India remain, analysts believe ICICI Bank is better placed than peers to tackle any headwinds in the near future. ICICI Bank shares were down 2.36% to trade at Rs 365 per share. The lender has recently raised Rs 15,000 crore via Qualified Institutional Placement (QIP), which saw marquee investors like Monetary Authority of Singapore, Morgan Stanley Investment Management, and Societe Generale invest in ICICI Bank.

ICICI Bank reported a net profit of Rs 2,599 crore, up 36% from the same period last year. This was aided by the bank’s 38% on-year jump in total income. Global brokerage firm and research firm Morgan Stanley, earlier this month said that a key positive in recent years for ICICI Bank has been material reduction in the funding cost gap compared with other private lender HDFC Bank. “The bank continues to show positive momentum in retail assets as well – retail loans grew 13% YoY (partly impacted by lock-down) and share of non-mortgage retail improved to 23% of overall loans vs 22% last year,” the report said.

On the non-performing assets front, the lender saw gross NPAs drop down to 6% last fiscal year, lowest in four years. Although retail slippages rose to 1.4% for ICICI Bank, the corporate segment did turn profitable after four years. Moratorium which has been a big worry for the financials, is a space where ICICI Bank’s has shown significant improvement. Portfolio under the moratorium was almost halved from April end to June 30, coming down from 30% to just 17.5%. Morgan Stanley is overweight on the stock with a target price of Rs 505.

With a network of 5,275 branches and 15,661 ATMs across India with ~50% of branches in semi-urban and rural areas, analysts say ICICI Bank is well placed to capture the surge in the rural economy. “The bank’s balance sheet remains strong and we expect growth momentum to resume from late FY21 onwards,” said Geojit Financial Services. Interestingly ICICI Bank shares have under-performed peers in the past few months. Since their March lows, HDFC Bank has surged 37%, IndusInd Bank has gained 71%, and Axis Bank has jumped 44%. ICICI Bank has only gained 28%, followed by Kotak Mahindra Bank’s 21%.

ICICI Bank’s successful effort to raise Rs 15,000 capital is also being looked at by rating agency Moody’s as a positive. “The allotment is credit positive for ICICI Bank because it will improve its capital position,” Moody’s said. “This is an important development because the ongoing economic slowdown exacerbated by the disruptions from the coronavirus outbreak, will have a negative effect on the bank’s asset quality and pressure profitability and capital,” it added. The additional capital will help raise ICICI Bank’s CET-1 ratio by 170 basis points, it said.