Country's largest private sector lender ICICI Bank on January 25 is expected to register solid triple-digit growth in profit in Q3FY20 on account of Essar Steel recovery and lower tax rate. Also, there could be a substantial decline in provisions during the quarter.
"Highlight for the quarter will be strong recovery from Essar steel NPA leading to asset quality improvement and provision write-back and also build in only Rs 2,200 crore of slippages," said Prabhudas Lilladher.
Net interest income (NII) and pre-provision operating profit (PPoP) may grow around 30 percent each year-on-year (YoY), with loan growth of around 13 percent YoY driven by retail and SMEs.
Kotak Institutional Equities expects a PPoP growth of around 25 percent YoY led by loan growth of around 13 percent YoY and healthy NII growth (33 percent YoY, one-off due to NPL recovery). "NIM (core) is expected to remain stable QoQ."
Asset quality is expected to be stable for the quarter.
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"We expect a reduction in gross NPLs on the back of write-offs and slippages at around 1.5 percent (of total loan book) levels. Credit costs to decline sharply QoQ on account of resolutions in a few large cases like Essar Steel, Ruchi Soya, JP Power. Below investment grade portfolio will remain stable," said Kotak Institutional Equities which expects profit growth of 212.6 percent YoY (up 665.9 percent QoQ) and 33 percent in NII (up 13.4 percent QoQ).
Edelweiss also said slippages would stabilise and would largely flow from existing stress pool. "That said, we need to watch for downgrades to BBB and below list (system has seen higher downgrades)."
While seeing profit growth of 506 percent QoQ and 146 percent YoY, Motilal Oswal said, "We estimate gross slippages at 2.5 percent annualised and net stressed loans (excluding NPAs) to decline from current 3 percent."
Key things to watch out for would be movement in BB and below-rated book, slippages from SME and Agri segment.
ICICI Bank remained the top pick of all brokerages considering the improving asset quality and loan growth. The stock rallied 24 percent during the December quarter, outperforming Nifty Bank (up 10.5 percent) and Nifty50 (up 6 percent).
Also, it closed at Rs 533.95, up by Rs 6.25, or 1.18 percent on January 24, ahead of earnings.
Disclaimer: The above report is compiled from information available on public platforms. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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