ICICI corrected on slight rise in large asset rejig: IIFL

India’s largest private sector bank, ICICI Bank Q4 net jumped 21 percent to Rs 2304 cr , yet stock saw a surprise fall of about 3 percent. Rajiv Mehta, banking analyst, IIFL feels that a slight increase in restructuring of assets led to the stock correction.

Mehta, however, is bullish on the stock with a nine month target of Rs 1350. Below is the verbatim transcript of Rajiv Mehta’s interview on CNBC-TV18 Q: The stock is selling off, now down about 2 percent odd. What is your take on these numbers and how would you approach the stock?
A: The numbers are pretty healthy and it is very difficult to figure out why the stock is correcting so much on these numbers. Overall, there has been improvement or the asset quality has been stable. NIMs at least have positively surprised because they have marginally improved sequentially. The net interest income is much better than what we had estimated also. It is just because the restructuring that has happened in the quarter is slightly larger than what the street was expecting, the stock is reacting adversely to it. I don’t think there is a big downside in the stock from hereon. Q: At Rs 1150 what would you recommend?
A: It has been a buy for us for a while and our nine months target price is Rs 1350. So, we are bullish on the stock. Q: What are your calculated NIMs and restructured assets for this quarter if you do a backward calculation?
A: Based on the full year number of NIMs which is 3.11 percent, there seems to be a marginal improvement in Q4 NIMs as compared to Q3 and that should be taken as a positive surprise because management has guided for stable NIMs. So, they have clearly outdone themselves. It seems to have improved in the quarter as compared to the previous quarter. Q: The stock is down and out post its numbers. May be it is also the other income which is plaguing the stock because fee income is absolutely flat on quarter on quarter (QoQ) basis at Rs 1775 crore versus Rs 1771 crore and the treasury income has gone down to Rs 93 crore versus Rs 251 crore. Do you think that would be another factor which is plaguing the street? Or was it factored in that their other income is going to be weak?
A: Other income was never an important trigger for ICICI Bank or the stock to go up. Rather largely being a corporate lender and having exposure to a significant extent to corporate fees. The trend in the other income especially in the fee income was weak in the previous quarters as well. So, we were not expecting a robust growth in that piece. They have beaten our numbers in the bottom-line and so, I need to look at the numbers more closely to find out where the issue is. Q: How would you look at it in terms of totality of ICICI Banks numbers this time around especially on the restructured as well as the possible slippages that you are expecting? For totality, would you be worried in terms of the asset quality going forward now?
A: We have been slightly cautious on the asset quality of the bank given the fact that it has a large corporate exposure, but vis-à-vis our expectations the bank has held up its asset quality pretty well in the previous three, four quarters. So, it is alleviating such kind of fears as far as a large or a huge deterioration is concerned in the asset quality piece.