ICICI Bank Q2 results today: 4 things to watch out for
Mumbai: ICICI Bank Ltd’s second quarter results are due on Friday and the street expects a dip in the lender’s profitability as compared to a year ago. More than the bottomline, analysts are eyeing asset quality trends, particularly the divergence in classification of bad loans as reported by its peers Axis Bank and Yes Bank.
September quarter net profit is seen at Rs2,570.1 crore, according to a Bloomberg poll of 21 analysts. In the previous quarter last year, the bank reported a profit of Rs3,102.27 crore.
Here are four things the street awaits clarity on.
Bad loans: Most analysts expect ICICI Bank to also report a rise in gross non-performing assets (NPAs) because of divergence—the difference between Reserve Bank of India’s (RBI) and the bank’s assessment—which is a risk-based supervision for fiscal 2017. Management commentary is awaited as to how much of the divergence amount would be tagged NPA and the trends in the so-called watchlist of stressed loans, which stood at Rs20,358 crore as at the end of June. Bad loans jumped to Rs43,147.64 crore and gross NPA ratio was at 7.99% as on 30 June.
Provisions: With a likely rise in bad loans, analysts also expect higher provisions, funds kept aside to cover for stressed loans. ICICI Bank will use gains arising from the stake sale in the ICICI Lombard General Insurance Co. Ltd to improve its provision coverage, Kotak Institutional Equities said in a report on earnings preview. Analysts would also watch out for ICICI Bank’s exposure to accounts which are part of RBI’s second list to gauge provisioning requirement in case they are referred for insolvency proceedings. In the RBI’s first list of 12 accounts referred to the National Company Law Tribunal, the bank has exposure to nine accounts. Here, the lender has to make additional provision of Rs647 crore, part of which will be made in the fiscal second quarter.
Profit: ICICI Bank’s net profit for July-September quarter is seen lower on a yearly basis because of base effect. The bank will have stake sale gains from general insurance stake sale but lower gains than last year from life insurance stake sale which will keep PAT (profit after tax) comparatively lower, brokerage Prabhudas Lilladher Pvt. Ltd said in a pre-earnings report. Bottomline is seen higher as compared to the June quarter.
Loan growth: While the growth in loans in expected to be muted, analysts would await for guidance on corporate credit demand for the second half, especially in the light of the recapitalisation package for public sector banks, which aims at reviving credit flow to the system. Analysts expect the bank’s overall loan growth to be 7-9%, better than the industry average, mainly led by momentum in retail advances.