ICICI Bank Q3 loan book may grow 19%; asset quality seen steady: Analysts

ICICI Bank Q3FY24 preview: Private sector lender ICICI Bank may clock margin compression in the range of 15 to 25 basis points (bps) in the December quarter on the back of re-pricing of deposit rates during the quarter. 
 

Pencilling-in the higher end of the estimate, analysts at Kotak Institutional Equities expect the 25-bps hit on net interest margin (NIM) to cap operating profit growth at 10  per cent year-on-year (Y-o-Y).
 

"We expect a pre-provision operating profit (PPoP) to grow at 10.1 per cent Y-o-Y to Rs 14,612 crore as we see further reduction in NIM by 25 bps. Loan growth is expected to be healthy at 18 per cent Y-o-Y led by contribution from all segments. We are anticipating NIM 4.1 per cent," the brokerage said in its results preview report.
 

PPoP was Rs 13,271.2 crore in Q3FY23 and Rs 14,229.3 crore in Q2FY24. 
 

ICICI Bank is scheduled to report its Q3FY24 results on Saturday, January 20. 
 

Estimating a slightly lower NIM compression at 20bps Q-o-Q to 4.3 per cent, analysts at Equirus expect the lender to report around 19 per cent Y-o-Y growth in loans and deposits each. 
 

The number is pegged at Rs 13,38 trillion for deposits (up 19.3 per cent Y-o-Y), and at Rs 11.57 trillion for loans (up 18.8 per cent Y-o-Y).
 

"We expect robust advances/deposit growth at 19 per cent Y-o-Y each. The loan growth is expected to be driven by retail segment. Besides, we expect NIMs to decline by ~20bps Q-o-Q, while contained credit cost trends should continue in the December quarter," said their report.
 

Among the key things to look out for, the brokerage said comments on trends in housing loan business as well as capex cycle, expected growth and guidance will be eyed.
 

Net interest income and PAT

Operationally, analysts expect the lender's net interest income (NII) to rise anywhere between 9 per cent and 12 per cent Y-o-Y, in the range of Rs 17,966.7 crore to Rs 18,490 crore.
 

NII was Rs 16,465 crore in the corresponding quarter of the previous year, and Rs 18,308 crore in the September quarter. 

Therefore, on a sequential basis, NII is expected to stay flat. 

ALSO READ: IndusInd Bank Q3 results: Net profit rise 17.2% to Rs 2,301.5 crore
 

Further, PPoP, on average, is expected to rise around 6.6 per cent Y-o-Y to Rs 14,140 crore from Rs 13,270 crore. This would be on  the back of higher operating expenses.
 

Motilal Oswal Financial Services, for instance, pegs opex at Rs 10,210 crore, higher than Rs 8,220 crore incurred last year. Sequentially, opex was Rs 9,860 crore.
 

"We expect credit costs to inch up slightly, but eye adequate contingency buffers to add comfort. Traction in opex and deposit growth will be the key monitorables," the brokerage said. 
 

It pegs net profit at Rs 9,990 crore, up 20.1 per cent Y-o-Y from Rs 8,312 crore in Q3FY23.
 

A cautious estimate by BNP Paribas caps PAT estimate at Rs 9,508  crore, up 14.4 per cent Y-o-Y, but down 7.3 per cent Q-o-Q from Rs 10,261 crore in Q2FY24.
 

Asset quality

Analysts expect gross non-performing asset (GNPA) and NNPA ratios to stay flat Q-o-Q at 2.5 per cent and 0.4 per cent, respectively.
 

Provision coverage ratio, meanwhile, is seen declining to 82.8 per cent from 83.1 per cent Q-o-Q. 

ALSO READ: Poonawalla Fincorp net profit jumps 76% to Rs 265 crore in December quarter
 

"We expect provisions to remain at Rs 2,039.2 crore (down 10 per cent Y-o-Y/up 250 per cent Q-o-Q) as we see lower slippages (1.8 per cent of loans vs 2.4 per cent Y-o-Y/1.8 per cent Q-o-Q) given the current economic environment. We are building slippages of around Rs 5,000 crore. Key concern would be the reversal of NIM, CASA growth outlook, and discussion on deposit mobilisation," Kotak Institutional Equities added.