India's largest private sector lender ICICI Bank met street expectations on the profit and net interest income front, but its asset quality and provisions took a hit in the quarter ended September 2014.
Provisions and contingencies jumped 17 percent sequentially (up 36 percent on yearly basis) to Rs 849.5 crore in the quarter gone by, with the provision coverage ratio at 65.9 percent as on September 2014. Asset quality of the bank weakened during the quarter with the gross NPA rising 4 basis points Y-o-Y (up 7 bps sequentially) to 3.12 percent and net NPA climbing 11 bps on yearly basis (up 9 bps quarter-on-quarter) to 0.96 percent.
In absolute term, gross NPA rose 6.5 percent Q-o-Q (up 15 percent Y-o-Y) to Rs 11,547 crore and net NPA surged 15 percent quarter-on-quarter (up 46 percent Y-o-Y) to Rs 3,942 crore in September quarter.
Analysts by and large are disappointed with the bank’s gross NPA and provisions.
Suruchi Jain of Morningstar India lauded the bank for its loan growth figure, which came in much higher than expected. However, she hopes that these loans have been given keeping good underwriting standards and practices intact, if not the provision number will rise going ahead.
Jignesh Shial of IDBI Capital Markets wants to hear the management commentary on the kind of corporate loan pickup the bank is seeing.
Immediately after the bank announced its Q2 numbers, the stock started seeing some correction. Shial believes a lot of positivity was already built in the stock, so any negative news could have resulted in a correction and that is what the stock is seeing.
Vaibhav Agarwal of Angel Broking too says the bank has disappointed on the asset quality front. "NPA addition looks Rs 300-400 crore more than expected," he told CNBC-TV18.
However, he believes the bank should hold on to its overall guidance. He doesn’t expect NPA additions exceeding that of FY14. Agarwal further believes that ICICI Bank is well placed to benefit from a pickup in the economy. He has a buy rating on the stock.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
