ICICI Bank likely to post strong Q1 profit with double-digit NII, loan growth
Country’s largest private sector lender ICICI Bank July 27 is expected to report a profit in the range of Rs 1,300-2,100 crore for the June quarter, backed by double-digit year-on-year (YoY) growth in loan book and net interest income.
The bank had reported a loss of Rs 119.6 crore in the June quarter last year and a profit of Rs 969.1 crore in the March 2019 quarter.
The stock gained 1.6 percent to close at Rs 415.50 on July 26. It has gained 51 percent over the last year amid hope of improvement in the asset quality.
Brokerages expect Q1 net interest income growth around 17-19 percent and loan growth around 13-15 percent YoY.
“We expect core earnings (base quarter had stake sale gains of ICICI Life) trajectory to remain strong at around 15 percent YoY, led by healthy loan growth (around 15 percent YoY) and better NII growth (19 percent YoY). NIM will decline QoQ by around 10 bps due to lower one-offs,” said Kotak which expects profit at Rs 1,393.1 crore for the quarter.
Prabhudas Lilladher also said adjusting for one-off stake sale gains of Q1FY19, core pre-provision operating profit (PPOP) growth will be better. Loan growth will also be better than the industry led by domestic & retail growth. NIMs, however, could be sequentially lower on one of I-T refund impact. Core NIMs though should be steady.
The likely double-digit YoY and sequential fall in provisions are also expected to boost profitability.
Kotak Institutional Equities as well as Prabhudas Lilladher expect 22 percent decline year-on-year and 15 percent sequential fall in provisions for bad loans.
Asset quality could see further improvement sequentially on write-offs. Prabhudas Lilladher sees gross non-performing assets as a percentage of gross advances declined to 6.61 percent in the June quarter, against 6.7 percent in the previous quarter.
“We expect a reduction in gross NPLs on the back of write-offs. Credit costs will decline QpQ led by lower slippages (around less than 1.7 percent of loans, primarily from agriculture). Below-investment-grade portfolio would decline QoQ and coverage ratio would improve QoQ,” Kotak said.
According to Motilal Oswal also, gross slippages are expected to moderate to 2.5 percent due to a reduction in corporate slippages. Net stress loans (including BB & below) as on Q4FY19 stood at 5.9 percnet of loans and are expected to decline further as incremental stress addition moderates.
Key things to watch out for would be an outlook on asset quality and trend on further relapse from restructured loans, and growth in CASA + retail term deposits.