ICICI Bank surges 11% after a strong second quarter, Street bullish

Shares of ICICI Bank surged 10.8 per cent on Monday to close at ~349.15 after the lender posted strong results for the September quarter (Q2) last Friday. Most analysts see the results in positive light, and have retained their buy rating, expecting further gains.

Key positive element was the improvement in overall asset quality, which helped the private corporate lender return to the black, posting net profit of ~9.1 billion. Though the profit is down 56 per cent yearon-year, it comes after the bank reported a loss in the previous quarter. Gross non-performing assets (GNPAs) or bad loans as a percentage of gross advances fell by 35 basis points to 9.3 per cent, as compared to the June-2018 quarter. Also, the share of stressed book, including sub-investment grade loan accounts (with credit ratings of BB and below), in total advances fell to 4.6 per cent as of September 2018 from 5.4 per cent in June 2018. “The improved asset quality along with robust growth in low-cost current and savings account (CASA), and expected loan book growth with focus on retail customers provide comfort in terms of near term earnings potentials,” say analysts.

Analysts at Edelweiss Securities said, “We believe, ICICI Bank is well-geared for next cycle with improved traction in quality asset growth, robust CASA franchise, efficiency gains and improved NIM (net interest margin).” The analysts, who have given ‘Buy’ rating for the stock, also believe the bank is on track to de-risk its balance sheet with improved share of better rated loan accounts, lower concentration risk, higher retail proportion and lower proportion of risk weighted assets (less than 73 per cent versus 84 per cent in FY16). Even the exposure to stressed sectors such as power, iron and steel is declining steadily.