ICICI Bank shares soared over 8 per cent in early trade on Thursday after the bank announced its fourth quarter results post market hours on Wednesday. At 9.48 am, ICICI Bank shares were trading 8.34 per cent up at Rs 295.50. The share price opened at Rs 290.25 and touched a high and low of Rs 296.50 and Rs 283.90, respectively in trade so far. Sensex was trading 180.87 points up at 30,075.67 during the same time. Share price of the private lender later closed 9.24 per cent up at Rs 297.95.
According to analysts, ICICI Bank posted mixed fourth quarter results. The private lender fourth quarter net profit jumped to Rs 2,024.64 crore, from Rs 701.89 crore a year ago. However, the asset quality woes which had dented its bottomline year-ago, continued to persist. The bank said its bad loans rose sharply due to one account in the cement sector. Total slippages for the reporting quarter was over Rs 11,000 crore, including a Rs 5,378 crore to a cement company which is bound to be acquired soon, while the bank wrote off a high Rs 5,386 crore of assets as per a laid down policy and recovery and upgrades were at Rs 1,400 crore.
According to brokerage house Sharekhan, the ICICI Bank management has guided that the pace of slippages in FY2018E will be slower compared to FY2017. Sharekhan has upgraded ICICI Bank to ‘Buy’ from ‘Hold’ with a revised price target of Rs 320 as it believes that H2FY2018E can see more meaningful improvements in asset quality, which will be important for the gradual re-rating of the stock.
The bank board has recommended a Rs 2.5 divided and also announced a bonus issue of one share for every 10 shares held. ICICI Bank managing director and chief executive Chanda Kochhar while addressing the media said that the dividend and bonus issue reflects the board’s view on the performance of the bank.
On the asset quality slippages, Sharekhan said, “Notwithstanding the positives of a strong retail franchise, best-in-class CASA ratio (50% of deposits), strong capital position (14.36% Tier 1) etc, the crucial metrics for markets are the quality of earnings and the asset quality. While the paring of the drilldown list is encouraging, we believe that the retail slippages as well as non-watchlist slippages can persist for another 2-3 quarters, albeit with a decreasing intensity. However, we believe that the worst in terms of asset quality slippages is behind.”
Another brokerage house Edelweiss Research also has recommended ‘Buy’ rating on the ICICI Bank with a target price of Rs 362. It said,” We believe these are challenging times as manifested in a temporary lull in earnings. However, one must not ignore ICICI Bank’s franchise strength, which will enable it to deliver healthy normalised returns post the turbulent phase. “