ICICI Bank is expected to report subdued Q4 earnings, with income and profit flat or up a little, as continued margin compression offsets sustained loan growth. However, asset quality would remain stable, with slippages and provisions likely to have been contained, according to analysts.
The lender is set to report its Q4 results on April 27.
The ICICI Bank stock ended at Rs 1,110.75 on the NSE on April 26, down 0.3 percent from the previous close. It has risen more than 11 percent since January, outperforming the Nifty 50, which has gained over 3 percent.
ICICI Bank’s net interest income is likely to rise 1.7 percent quarter-on-quarter to Rs 18,958 crore in the fourth quarter, according to the median estimate of seven brokerages polled by Moneycontrol.
“In a quarter impacted by tight liquidity and continued pressure on deposits, sequential decline in NIMs (net interest margins) is a given -- more so for private banks,” JM Financial said in a pre-earnings note.
Pre-provisions operating profit (PPoP) will remain flattish -- up 0.6 percent on-quarter at Rs 14,806 crore during the January-March quarter. ICICI Bank’s Q4 net profit is likely to remain little changed at Rs 10,331 crore -- up 0.6 percent from the previous quarter.
ICICI Bank Q4 FY24 Results Estimates | NII seen marginally up, Net Profit seen flattish
Banks in India are under sustained pressure to mobilise low-cost deposits. Instead, they are having to depend on high-cost funds to feed the growing demand for credit, which is hurting their margins.
Last week, HDFC Bank reported a largely stable net interest margin for the quarter as India’s largest private sector lender focussed on mobilising deposits over growing the loan book aggressively.
Sustained loan growth
However, ICICI Bank is likely to sustain loan growth, taking a small hit on the net interest margin due to the higher cost of funds.
“While loan growth could come in at 4.3 percent (quarter-on-quarter), we expect net interest income to remain flattish QoQ due to net interest margin decline of 14 bps QoQ, led by faster rise in cost of funds,” Prabhudas Lilladher said in a note.
Dolat Capital said ICICI Bank’s loan growth would sustain at 4 percent QoQ but net interest margin would decline, led by "higher cost of funds."
Kotak Securities expects net interest margin to decline by ~20 bps quarter-on-quarter to 4.3 percent.
However, the quantum of margin compression for ICICI Bank is likely to be lower in the latest fiscal quarter, said Axis Securities, adding that deposit growth is expected to improve sequentially.
Stable asset quality
Axis Securities expects "no challenges" on ICICI Bank’s asset quality, and most brokerages suggest cautious optimism regarding provisions, with a keen eye on slippages. Emkay Research said it expects slippages to moderate quarter-on-quarter due to the absence of lumpy corporate non-performing assets.
Lower slippages would lead to lower provisions.
“We expect provisions to remain low as we see lower slippages, given the current economic environment,” said Kotak Securities. “We are building in slippages of about 2 percent (or about Rs 50 billion),” it added.
Further, the reversal of provisions made in the previous quarter (Q3) could aid earnings, said Dolat Capital. The reversal of alternative investment fund-related provisions would also lower credit costs, added Axis Securities.
What to watch
A key concern would be the progress of net interest margin as the cost of funds is yet to peak, especially with slower CASA (current account and savings account) growth, said Kotak Securities.
Deposit mobilisation is likely to be another key area of interest for investors.
Disclaimer: The views and investment tips expressed by investment 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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