ICICI Bank Q2: Up to 4x jump in profit likely, loan growth seen at 6% YoY

Emkay Global Financial Services note that the private lender has done the heavy-lifting on provisions in Q4FY20 and Q1FY21. Thus, incremental provisioning should be moderate leading to healthy profits

ICICI Bank, India’s second largest private bank by market-capitalisation, could report stellar improvement in its September quarter (Q2FY21) results on a yearly basis, riding on low base and better asset quality.

The lender, which is slated to declare its Q2 results on Saturday, October 31, may report up to 4-fold rise in its net profit, analysts say. Besides, reduction in bad loans, coupled with lower provisions (sequentially), may aid profitability.

BOB Capital, for instance, expects the bank’s profit to grow 453 per cent YoY to Rs 3,621.4 crore for the quarter under review, compared with a profit of Rs 655 crore. Sequentially, too, the brokerage sees the profit clocking decent double-digit growth from Rs 2,599.2 crore reported in Q1FY21.

On the lower side, analysts at Prabhudas Lilladher see the profit up 279 per cent YoY to Rs 2,484.8 crore while those at Nomura foresee the net profit at Rs 4,307.2 crore, up 558 per cent YoY.

"Impact of sequentially lower other income on PAT could be offset by lower provisions, while a strong growth is expected on a yearly basis due to deferred tax assets (DTA) impact in the base quarter," a report by Prabhudas Lilladher noted.

Most of the analysts see the lender's other income declining sequentially as it booked one-off gains worth Rs 3,036.29 crore in Q1FY21 on the back of stake sales in ICICI Prudential Life and ICICI Lombard General Life Insurance. On an average, other income is seen around Rs 4,400 crore, down from Rs 6,140 crore reported in Q1FY21.   

As regards net interest income (NII) – the difference between interest earned and expended- analysts expect it to rise anywhere between 14 per cent and 18 per cent from Q2FY20’s NII of Rs 8,057.4 crore. At the higher end, NII is seen at Rs 9,510 crore for the recently concluded quarter. Net interest margin (NIM) is seen stable at 3.6 per cent.

Loan book and asset quality

Analysts at BOB Capital expect loan growth to remain subdued at 6-7 per cent on a yearly basis. Those at Nomura see it growing mildly lower at 5.7 per cent to Rs 6.48 trillion. Deposits are, meanwhile, estimated to grow at around 20 per cent YoY to Rs 8.37 trillion.

Emkay Global Financial Services note that the private lender has done the heavy-lifting on provisions in Q4FY20 and Q1FY21. Thus, incremental provisioning should be moderate leading to healthy profitability, it said in a result preview note.

Prabhudas Lilladher expects the provisions to jump 90 per cent from the previous year’s Rs 2,506.9 crore to Rs 4,759.4 crore during the September quarter. The number would slip 37 per cent on a quarterly basis from Rs 7,594 crore set aside in Q1FY21. HDFC Securities, however, sees the provisions growing only 39 per cent YoY.

That apart, gross non-performing asset (GNPA) ratio is seen improving 28 bps QoQ and 119 bps YoY to 5.18 per cent.

Commentary eyed

Given lean business and Supreme Court’s stay on NPA recognition, analysts would watch out for the bank’s commentary on incremental Covid-19 related provisions; collection efficiency; movement in BB and below-rated book; and outlook on asset quality (including restructuring).

During the September quarter, the Mumbai-based bank’s stock price underperformed at the bourses. While the S&P BSE Sensex advanced 9 per cent, the bank’s stock price moved higher by only 1 per cent, ACE Equity data show.