ICICI Bank good bet, but look out for retail NPAS
YOUR
ICICI Bank has benefited from the challenges facing peers in the sector. In the June quarter, when the private lender demonstrated its ability to correct its asset quality issues sharply, it regained investors’ trust significantly.
Brokerages including Morgan Stanley and Nomura have increased their allocation to the ICICI Bank stock in recent weeks, as competitors face issues such as possible slowdown in retail loans and elevated provisioning costs.
The underperformance by the Axis Bank stock lately, too, has helped ICICI Bank level valuations against the former, after nearly four years. Factors such as lower toxic assets, a good mix of retail and corporate loans, comfortable levels of unsecured retail portfolio, and a favourable deposit base have added to the strong sentiment for ICICI Bank.
The share of retail loans in overall book has increased from 42 per cent to 61 per cent, in June quarter (Q1), after four years. It surpasses HDFC Bank, known to be the market leader in retail loans. Further, the proportion of unsecured retail loans was contained at 13.3 per cent (though it doubled from 6.6 per cent in FY15). This provides comfort as delinquencies in retail loans are inching up.
“The bank is comfortable with the growth in unsecured lending portfolio, given its under-penetration among existing clients (at 8 per cent of loans) and stable quality trends,” say analysts at CLSA.
Yet, one should keep an eye out on these numbers, as gross non-performing assets (NPA) ratio for retail loans rose to 1.9 per cent in Q1, marking a jump of 12 bps year-onyear. In FY15, the corresponding number was 2.02 per cent.
However, ICICI Bank trumps its rivals, which have unsecured loans upwards of 15 per cent.
In addition, amid debates over the impact of linking loans to external benchmarks on profitability, ICICI Bank’s share of low cost current account- savings account (CASA) deposits — at 45 per cent in Q1 (50 per cent a year-ago) — could help mitigate margin compression.
Higher share of non- CASA deposits may limit ability of banks to reduce deposit rates in a declin3.8 Credit cards 9.3 Personal 1.8 Others (%)
50.6 Home ing rate trajectory. In Q1, the bank fared better than peers on this parameter, too.
Yet, it won’t be fair to assume all is fine. The share of loans to relatively weaker corporates (BB and below) accounted for 29 per cent of its total book in Q1FY20, and has increased from 28 per cent in FY19.
With fresh trouble brewing by the day, investors need to be watchful. A further increase in retail NPA ratio may test investors’ faith on the stock. “ICICI Bank is showing promise of better underwriting at this point of the cycle, although we would need a few quarters to establish relative comfort,” say analysts at Kotak Institutional Equities. If you have not received your tax refund, there’s a high probability that you don’t have a pre-validated bank account. From this year onwards, the tax department has made it mandatory for individuals to link the bank account with their Permanent Account Number and also validate it, according to tax experts.
From this assessment year onwards, the income-tax department has said that it will issue erefunds directly to the bank accounts of the assessees. “There could be other reasons for a taxpayer not receiving the refund. Failing to do pre-validation is the most common,” says Naveen Wadhwa, a chartered accountant with Taxmann.com. The other reasons for not getting the refund could be that you have not verified the returns or the claims made in the tax return do not match the information given.
Once an individual files his return, the tax department carries out an assessment and informs taxpayers of the result. This assessment primarily includes arithmetical errors, internal inconsistencies, tax calculation, and the verification of tax payment. The result of the assessment communicated to the taxpayer is called “intimation under Section 143(1)”.
If a taxpayer has not received the refund, he should check whether he has received this communication. The letter has details of the calculation done by the assessee and whether it matches the records with the tax department. If there is a refund you will see whether the department has made adjustments, or if there is any further demand. If you have not received the communication from the tax department, it could also mean that your assessment is not yet done.
If the intimation under Section 143(1) shows a refund, and you still have not received it, the issue could be with the pre-validation of the bank account. To link your bank account, you need to log into your e-filing account. The option to “pre-validate bank account” is available under the “profile settings”. If all your details — name, date of birth, and mobile number — with the tax department and bank match, the account is validated. If there’s a mismatch, and the taxpayer is unable to pre-validate account, he will need to get the
details rectified in the records of either the bank or tax department.
According to tax experts, nonresidents are facing more of such problems because the tax department does not accept international mobile numbers. Many a time non-residents provide the mobile number of their accountant or relatives to the tax department whereas the bank has an overseas mobile number. The details, therefore, doesn't match, and validation remains incomplete.
Another reason for not receiving the refund could be that the department has found issues with your returns, and it has sent a communication. “A taxpayer needs to log into his e-filing account and check if there's any communication from the tax department about the filed returns,” says Arvind Rao, a chartered accountant and an investment advisor registered with the Securities and Exchange Board of India. Until the taxpayer addresses the communication sent, the department will not process the refund.