Analysts give thumbs-up to ICICI Bank post Q3 earnings

In an interview to CNBC-TV18, Nilesh Parikh of Edelweiss Financial Services; Rajiv Mehta of IIFL and Hatim Broachwala of Karvy Stock Broking spoke about ICICI Bank’s Q3 earnings and their outlook on the stock. Below is the interview transcript of the analysts CNBC-TV18 to Sonia Shenoy and Latha Venkatesh. Latha: What is your first take on the Q3 numbers of ICICI Bank? Parikh: The headline profit after tax (PAT) is higher than what we were estimating and above what the street is also estimating. Largely, it has come on the back of slightly higher net interest income (NII) and provisioning is what the street was also expecting close to about Rs 700 crore. So it has largely come in line. The gross non-performing assets (NPA) numbers seems to have plateaued. But we would need to probably see if there is an element of write-off which is there because the net NPA has moved up on a quarter-on-quarter (Q-o-Q) basis. Overall, the other income is something, which has supported the profit growth, which has come in tad higher than what we have estimated.Latha: Net interest margins (NIMs) have improved to 3.32 percent and the domestic NIMs, which will be closely watched, have come in at 3.67 percent. Your comments on both of these parameters?Parikh: Looking at the net interest income (NII) numbers which is slightly ahead of what we were thinking, we were building in almost flattish. So, it has largely come in line with that. Operationally, the numbers are what the management has been talking about and it is coming quite strong over the last couple of quarters. It is only on the non-performing loans (NPL) side where last quarter we have seen some revision and guidance on the flow of numbers on restructuring and on slippages. So that is something that we probably need more details on.Latha: What are your first comments?Mehta: I would want to agree with Nilesh Parikh that operationally numbers have been pretty good. In the current challenging environment, the fact that they are able to hold on to their NIMs is pretty impressive and pretty consistent with what they have been saying over the past few quarters. Slightly worried about the uptick in the net NPA and even I would want to have more details about the movement in the gross NPA number and is it because of any kind of - because that number has stayed stable on sequential basis. So it is because of write-off or a kind of a sell of the NPA in the quarter. So otherwise I would want to say that the numbers are pretty good vis-à-vis our expectations because there is a clear beat on the NII line.Latha: What is your target price?Parikh: It is Rs 1,288.Latha: What is your rating and price target?Mehta: We see sharp correction in the ICICI Bank stock. We have turned positive because we do see material upside in the stock now at this price and the valuation support is pretty robust at the current price. Given the fact that they have outperformed our expectations on the NIM, it seems to suggest that any incremental pressure on the asset quality could be easily absorbed from the margins upside which they are looking at. So I think they will be able to deliver a stable set of RoAs of 1.4-1.5 percent and given the current valuations at about 1.4 times for this standalone bank we think that the chances of a downside from the current price are pretty limited. We are looking at rather a significant upside over the next 12 months.Latha: You must have heard and seen most of the numbers, what is the initial comment?Broachwala: Overall numbers looks in line with our expectations. I think gross non-performing assets (GNPA) is flattish sequentially. Other income had been pretty high. We were expecting pretty low number there and opex has been slightly on the higher side. S o overall it seems that results are pretty okay.Latha: What is your rating and price target now on the stock?Broachwala: Currently, we have a buy rating on the stock. We have a target price of Rs 1,190 and probably we will wait for the management commentary before taking a final call.