ICICI Bank Shares Rise After Q3 Results, Analysts Bullish After Better Operating Profit

Most analysts maintained their bullish investment recommendations on ICICI Bank Ltd. as strong growth in net interest income offset the impact of higher slippages in the quarter ended December.

The private lender’s net profit jumped 158 percent year-on-year to Rs 4,146.46 crore in the quarter ended December, according to its exchange filing. That’s mainly because of the resolution of its non-performing asset Essar Steel Ltd.

Its net interest income, or core income from operations, rose 24.3 percent over last year to Rs 8,545.32 crore.

While the bank’s headline asset quality improved during the quarter, slippages or new bad loans jumped 76 percent sequentially to Rs 4,363 crore. That was mainly led by two large accounts that have been classified as non-performing—a housing finance company, which has been fully provided for, and a south India-based industrial company.

Shares of ICICI Bank gained for the third straight session on Monday. The stock rose as much as 2.1 percent compared with a 0.5 percent drop in the Nifty 50 Index.

Here’s what the brokerages have to say about ICICI Bank’s Q3 results

UBS

• Maintains ‘Buy’ with a target price of Rs 620 apiece.
• Strong operating profit performance; but higher slippages.
• Management expects credit cost to remain higher in the fourth quarter.

Bank of America Merrill Lynch

• Reiterates ‘Buy’ with a target price of Rs 600 apiece.
• Lowers FY20/21 earnings per share estimates by 1-10 percent.
• Asset quality normalisation still a couple of quarters away.
• Higher slippages due to corporate; retail portfolio stable.

Citi Research

• Maintains ‘Buy’ with a target price Rs 650 apiece.
• Miss on earnings due to higher provisions which were partly offset by higher-than-expected treasury income.
• While weak macro environment could lead to increase in BB and below loan book, the bank is on track to deliver steady earnings growth on the back of an improvement in operating profit and benign costs.

JPMorgan

• Remains ‘Overweight’ with a target price of Rs 650 a share.
• Strong operating profit growth; increase in slippages and BB and below book proved to be asset quality headwinds.
• Overall third quarter was a mixed set of earnings.

Edelweiss

• Maintains ‘Buy’ with a target price of Rs 631 apiece; reiterates the stock as its top pick.
• Third-quarter performance aptly reflected management’s endeavour to sustainably build on core operating performance to take care of any volatility in asset quality.
• Core operating growth of more than 20 percent negated asset quality hiccups.
• Slippages higher, but essentially from known accounts.
• Reiterates that ICICI Bank will progressively be valued up as the market gains more confidence in its return-on-equity focus.

Motilal Oswal

• Maintains ‘Buy’ with a target price Rs 650 apiece.
• Strong operating performance; margins expand on improving asset mix.
• Highest-ever quarterly profits supported by Essar Steel Ltd.’s resolution.
• Loan growth in chosen business segments (retail, business banking and SME) remained buoyant, while deposits growth moderated in the quarter.
• High provision coverage ratio and limited exposure to stress names will keep credit costs under control.