With maintaining neutral rating and target price of Rs 265, IDFC Securities said valuations are unexpensive but near-term pressure on asset quality exists
ICICI Bank shares tanked more than 5 percent on Monday after the bad asset quality performance in April-June quarter that resulted a 25 percent decline in profit.
Provisions for bad loans shot up significantly by 163.2 percent on yearly basis to 2,514.5 crore, though sequentially declined 24.4 percent from Rs 3,326.2 crore. Provision coverage ratio slipped to 57.1 percent from 61 percent on a QoQ basis, the country's largest private sector lender said.
Gross NPAs were up by 3.7 percent at Rs 27,193 crore and net NPAs jumped 16 percent to Rs 15,041 crore compared with preceding period. Slippages stood at Rs 8,249 crore (against Rs 7,003 crore in Q4FY16), which were far ahead of analysts' estimates of around Rs 5,000 crore.
Net interest margin during the quarter remained under pressure, which may continue, Chanda Kochhar, Managing Director and Chief Executive Officer said. NIM fell to 3.16 percent from 3.37 percent on sequential basis.
With maintaining neutral rating and target price of Rs 265, IDFC Securities said valuations are inexpensive but near-term pressure on asset quality exists.
Axis Capital, which has retained buy with target price of Rs 310 on the stock, expects pain to continue for sometime. CLSA reduced its earnings estimates for FY17-18 by 3-5 percent while maintaining buy rating with target of Rs 320.
JPMorgan, which has retained neutral rating with target of Rs 240, also cut FY17 estimates by 9 percent, and reduced net interest margin forecast as it expects accelerated slippages to impact yields.
Macquarie feels the credit cost will remain elevated in FY17. "We don't see further re-rating until credit cost comes down," it said while maintaining neutral rating with target price of Rs 262 per share.
At 15:14 hours IST, the scrip of ICICI Bank was quoting at Rs 249.20, down Rs 13.65, or 5.19 percent amid high volumes on the Bombay Stock Exchange.
Posted by Sunil Shankar Matkar