BackICICI Bank shares jump 8% on improvement in asset quality
ICICI Bank shares rose as much as 7.44%, its maximum gains since 9 August, to ₹338.50 a sharea level last seen on 3 September
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Mumbai: ICICI Bank shares on Monday gained as much as 7.5% to hit a near two-month high as many brokerages increased the stock’s target price after the bank reported a fall in provisions, slippages and improvement in asset quality. ICICI Bank shares rose 7.44%, its biggest gain since 9 August, to ₹ 338.50 a share—a level last seen on 3 September. At 10 am, the stock was trading at ₹ 338.30 on BSE, up 7.4% from previous close. ICICI Bank had announced its Q2 on Friday after market hours. Year to date, ICICI Bank share prices are up 7.25%.
The bank added bad loans worth ₹ 3,117 crore in the second quarter, compared to ₹ 4,036 crore in the first quarter. Provisions fell 33.1% from a quarter ago to ₹ 3,994.29 crore. As a percentage of total advances, GNPA stood at 8.54% in the September quarter, compared with 8.81% in the June quarter.
“With a declining trend in fresh slippages after several quarters, we believe that the peak of NPA recognition cycle is over now, and the incremental additions to NPAs are expected to stay significantly lower than the previous years," said Emkay Global in a note to its investors. The brokerage has maintained its buy rating and increased its target price to ₹ 404 a share.
Net interest margins improved to 3.33% from 3.19% last quarter and retail fee income growth of 17% year on year. Loan growth was at 13% year on year, within which domestic loan grew 16% from a year ago.
“We believe ICICI Bank is in a strong position to leverage to its strong retail franchise and, with peak of stress recognition behind and credit cost normalization, RoA and RoE are likely to improve to 1.3% and 14% respectively by FY20," said Antique Stock Broking Ltd in a 29 October note to its investors. The brokerage has maintained its buy rating and increased its target price to ₹ 400, up 27% from current market price.
ICICI Bank posted a net profit of ₹ 908.88 crore for the three months ended 30 September compared to ₹ 2,058.19 crore in the year-ago period. Profit was marginally lower than the ₹ 949.30 crore estimated by a Bloomberg poll of 20 analysts. Net interest income increased 12.41% to ₹ 6,417.58 crore from ₹ 5,709.07 crore in the corresponding period last year.
“We are now seeing the commentary shifting gradually towards loan growth, NIM and importantly, decline in credit costs. As these trends are firmly visible, we believe that the RoE expansion has started to unfold, which would give greater confidence for valuation expansion," said Kotak Institutional Equities in a note. The brokerage firm has maintained buy rating and increased its target price to ₹ 410 a share from ₹ 400.
Of the analysts covering the stock, 49 have a “buy" rating on ICICI Bank shares, one has a “hold" and one “sell" rating, shows Bloomberg data.
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