Outside the ICICI Bank Towers in Mumbai, India (Photographer: Prashanth Vishwanathan/Bloomberg)

What Dalal Street Made Of ICICI Bank’s Q4 Performance

Shares of ICICI Bank Ltd. rose as much as 5.85 percent, the most in over six months, as cheap valuations and lower stress from bad loans was seen trumping the steepest fall in quarterly profit since 2016.

Most brokerages remained upbeat as they expect the private sector lender’s asset quality to remain stable despite higher provisions. The bank reported 50 percent decline in profit for the March quarter to Rs 1,020 crore.

Deutsche Bank retained a ‘Buy’ call on the stock with a target price of Rs 350 per share. “We are a tad disappointed that provision coverage ratio remained only at 48 percent as it could have taken more to improve coverage,” it said in a report post ICICI Bank’s earnings.

Overall, asset quality is not worsening, which is comforting, but we expect a few more quarters of heavy provisioning.
Deutsche Bank Report

Morgan Stanley retained ICICI Bank among its top picks for 2018, even as it expects the lender’s stock price to be volatile.

The stock, which is currently trading at Rs 289.80, has fallen 7.7 percent this year so far, under-performing the NSE Nifty Bank Index which has fallen 1.22 percent during the same period. The S&P BSE Sensex has gained 3.4 percent during the same period.

The stock will be volatile as earnings progression will be choppy, and there will be management-related news flow, but stock should do well over the next 12 months. ICICI Bank remains a top pick for 2018.
Morgan Stanley Report

Credit Suisse, however, cut its target price for ICICI Bank by 12 percent as it expects credit costs for the lender to remain high in the current financial year. Pick up in loan growth should be sustained without any dilution as the bank is well-funded, the brokerage said.

Here is what other brokerages had to say about ICICI Bank's earnings:

Nomura

  • Retain Buy; target price hiked to Rs 400 from Rs 375; implying an over 38 percent upside from the the current levels.
  • Cheap valuations at around 1.1 times financial year 2020 estimate book; plateauing stress.
  • Getting closer to the end of the recognition cycle.
  • Expect the bank to get to normalised return on equity of 13-14 percent by FY20E.
  • FY19E earnings are cut by 33 percent but FY20E earnings are up 4.5 percent.
  • The focus post this cycle will move to improving quality of the balance sheet.

Edelweiss

  • Retain ‘Buy’ with a target price of Rs 370; implying an upside of around 28 percent from the current levels.
  • On the positive front, stress pool (excluding gross bad loans) came off to less than 3 percent ( over 5 percent in Q3FY18).
  • Core operating performance surpassed expectation.
  • Pick-up in growth, robust retail segment and moderation in credit cost (major stress recognition done) will enable ICICI Bank clock over 15 percent return on equity by FY20E.
  • The overhang pertaining to clarity on management change is a key monitorable.

Axis Capital

  • Maintain ‘Buy’ with a revised target price of Rs 370 from Rs 405 earlier; still implying an upside of around 27 percent from current levels.
  • Large chunk of non-performing asset recognition is behind.
  • Provisions will stay elevated in FY19.
  • Remain watchful of recoveries and upgrades from the stressed book along with resolution of National Company Law Tribunal cases.