ICICI Bank Q3 Preview | Healthy growth likely across key earnings parameters with stable asset quality

ICICI Bank

ICICI Bank, the country's second-largest private sector lender, is expected to report healthy earnings growth across key parameters with falling provisions and stable asset quality, which is largely in line with the industry trends. The bank will release December 2021 quarter earnings on January 22.

The stock clocked stellar performance since the beginning of October 2021 quarter, rising 15 percent, following the expected recovery in the industry amid healthy credit growth and no lockdown by the government in the third wave of Covid-19. In fact, it sharply outperformed benchmark Nifty50 and sector index Bank Nifty that reported muted performance in the same period.

Analysts largely expect more than 20 percent growth in ICICI Bank's net interest income amid likely 15 percent credit growth and stable net interest margin in Q3FY22 YoY, while the profit growth is expected to be more than 16 percent with fall in provisions and base effect.

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"We expect a pre-provision operating profit (PPoP) growth of around 15 percent YoY. Loan growth to be stable at around 15 percent led by SME and retail but with better contribution from corporate as well," says Kotak Institutional Equities which sees 18 percent profit growth and 20.5 percent growth YoY.

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The brokerage further feels the scope for net interest margin (NIM), at 4 percent, to improve is negligible as they see pressure on lending yields and no further benefit on funding costs decline.

IDBI Capital says, "We expect NII growth of 23.6 percent YoY and PAT to increase 16.2 percent YoY due to better operating profits YoY. We expect loan growth and deposit growth of 15 percent each YoY."

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Provisions in the year-ago quarter (Q3FY21) were significantly higher at Rs 2,742 crore but despite that the profit was 19 percent higher YoY. It had nearly Rs 10,000 crore of Covid-related provisions at the end of the December 2020 quarter.

Kotak expects provisions to slide down to 1.2 percent of loans, leading to lower net non-performing loans (NPL) ratios. "We are building slippages of around 2 percent but we see a solid commentary on recovery to continue resulting in lower stress coming from asset quality perspective."

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Commentary on asset quality would be a key monitorable factor.