ICICI Bank, India's second-largest private bank, will report its Q1FY24 numbers on July 22, and may see June quarter net profit rise to Rs 8,982 crore YoY (down 5.1 percent quarter on quarter), according to a poll of three brokerages conducted by Moneycontrol.
This, analysts said, would be on the back of higher provisions. By comparison, it was Rs 9,121.9 crore in the March quarter of FY23 (Q4FY23) and Rs 6,904.9 crore in Q1FY23.
Analysts at Prabhudas Lilladher expect Mumbai-based ICICI Bank's provisions to rise 17.3 percent on quarter and 66 percent on year to Rs 1,900 crore. Whereas Kotak Institutional Equities pegs the same at Rs 1,700.8 crore, up five percent QoQ (from Rs 1,619.8 crore) and 49 percent YoY (from Rs 1,143.8 crore).
"We expect provisions at Rs 1,701 crore, and expect to see lower recovery/upgrades hereon. We are building slippages of 2.5 percent (around Rs 6,500 crore) as Q1FY24 slippages could be higher from the agriculture portfolio. The key concern would be the reversal of net interest margin (NIM) as cost of funds is starting to move up sharply for the sector, especially with slower current account-savings account (CASA) growth," Kotak Institutional Equities stated in a results preview report.
Analysts expect net interest margin (NIM) to contract 10 basis points sequentially to 4.8 percent from 4.9 percent. In the corresponding quarter of the previous year, NIM stood at four percent. Operationally, net interest income (NII) is also expected to stay muted quarter-on-quarter, with brokerages forecasting a drop of up to two percent to Rs 17,571 crore.
"We expect NII to de-grow by 1.3 percent QoQ even as loan growth seen at two percent, since NIM decline of 11bps QoQ would be more due to higher floating rate portfolio," said Prabhudas Lilladher.
“First quarter of NIM decline after 3 strong quarters. NIM to decline 15bp and loan growth will be 3.5 percent QoQ. NII growth will be lower than previous quarters at 1.5 percent QoQ,” said Nuvama Equities.
On average, brokerages expect cost-to-income (C/I) ratio to rise by 193bps QoQ (down 117bps YoY) to 41.2 percent. Credit costs, meanwhile, may stay between 0.5 percent and 0.7 percent. Gross NPA ratio is seen rising marginally to 2.9 percent from 2.8 percent QoQ.
Brokerage Views
Brokerage firm KRChoksey has given a target price of Rs 1,175 for ICICI Bank in a recent research report. Whereas, Motilal Oswal has given a target price of Rs 1,150 in a research report dated April 23, 2023. Thus, signifying a potential upside of nearly 20 percent from the current market price of Rs 996.80.
Stock Performance
The shares of the lender have rallied 13.4 percent thus far in financial year 2023-24 (FY24), as against 15 percent rise in the benchmark Nifty50 index and 13.7 percent gain in the Nifty Bank index.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol.com are their own and not those of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.
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