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Shares of ICICI Bank rose more than 6 percent in the opening trade on Tuesday despite poor YoY performance.
India’s largest private sector lender, ICICI Bank on Monday reported a 49.6 percent year-on-year (YoY) drop in net profit at Rs 1,020 crore for the fourth quarter-ending March 2018.
The quarterly numbers were largely in-line with Reuters estimates and it looks like most of the bad news is factored in the price. The stock has already fallen nearly 8 percent so far in 2018 and nearly 13 percent in the last three months which suggests that the market has priced in all the negatives for the stock.
The bank’s potential list of bad loans decreased to Rs 4,728 crore on March 31, 2018 from Rs 44,065 crore on March 31, 2016. The management rates them as loans below investment grade.
Net interest income (NII) inched up marginally to Rs 6,021.67 crore in the quarter gone by from Rs 5,962 crore YoY. It was projected to be marginally lower by about two percent at Rs 5,832 crore, as per a Reuters poll.
ICICI Bank still remains one of global investment banks’ top picks. They see the private sector lender rallying up to 48 percent in the next one-year post its recent fall.
We have collated the views from different brokerage firms post ICICI Bank Q4 FY18 result:
Credit Suisse: Outperform| Target cut to Rs357 from Rs405| Return 23%
Credit Suisse maintains an outperform rating on ICICI Bank but slashed its target price to Rs357 from Rs405 earlier. The operating performance is yet to pick up which could pose as a challenge and about 15 percent of the loan book has turned into NPAs.
The residual stress is now at 3 percent and slippages rose sharply led by the impact of the RBI circular. ICICI Bank has a strong capital position, and valuation still remains attractive.
CLSA: BUY| Target: Rs430| Return 48%
CLSA maintains a buy rating on ICICI Bank with a target price of Rs430. The Q4 net profit was below estimates, but operationally, the numbers were largely in-line with estimates.
Slippage rose sharply primarily from existing stressed book and Gitanjali Gems. However, key positive was healthy Casa growth and focus on de-risking. Going forward, improvement in asset quality will be key to ICICI Banks re-rating. It remains as CLSA’s top pick.
Morgan Stanley: Overweight| Target: Rs425| Return 47%
Morgan Stanley maintains an overweight rating on ICICI Bank with a 12-month target price of Rs 425. The core pre-provisioning operating profit was ahead of estimates. The focus for the quarter was largely on the asset quality which is positive.
At 09:28 hrs ICICI Bank was quoting at Rs 307.60, up Rs 18.20, or 6.29 percent on the BSE.
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