ICICI Bank plunges over 4% post Q4 results, should you ‘BUY’, ‘SELL’ or ‘HOLD’?

ICICI Bank shares declined over 4 per cent on Monday after the private sector lender on Friday reported its worst numbers in over a decade with consolidated net profit plunging 87 per cent in the March quarter at Rs 406.71 crore due to a spike in provisioning for bad loans.

According to Reliance Securities, ICICI Bank continues to surprise negatively on both earnings and asset quality fronts in 4QFY16, primarily due to higher slippages, as the bank recognised impairment as well as ensuing provisioning impact of asset reclassification as per the RBI’s evaluation.

The brokerage house in a research note further said, “We continue to admire core operating performance and business franchise of ICICI Bank, near-term headwinds clearly indicate more downside for the stock in ensuing months. We expect the Bank’s asset quality stress to continue over next 4 quarters along with elevated credit costs, which would keep RoAs muted at around 1.4-1.6 per cent and RoEs at 11-13 per cent over FY16-18E. We continue to maintain our ‘Sell’ recommendation with an unrevised target price of Rs 210.”

On a standalone basis, the bank’s net profit tanked 76 per cent to Rs 701.89 crore from Rs 2,922 crore a year ago.

Religare Institutional Research also maintained ‘Sell’ rating on ICICI Bank shares. It said, “We slash our 2016-17 and 2017-18 estimates by 18-20 per cent citing margin pressure and elevated provisions, and accordingly revise down our March 2017 target price to Rs 200 from Rs 230 earlier. We believe that any meaningful improvement in stressed asset formation is still a while away for the bank.”

According to Macquarie, ICICI Bank has loans to five sectors below investment grade: power, iron/steel, mining, cement, and rigs. It maintained ‘neutral’ rating on ICICI Bank shares post Q4 results.

Macquarie also cut earnings estimates for FY17-18 by 15-16 per cent on slower growth and lower margins.

The share price of ICICI Bank settled 4.08 per cent down at Rs 226.95. The BSE Bankex closed 1.34 per cent down at 18,859.07.

(With agency inputs)