ICICI Bank rallies nearly 9% on hopes of improvement in asset quality

ICICI Bank shares rallied on hopes of improvement in asset quality. The stock jumped as much as 8.7 per cent to 314.50, highest since March 1.

Jefferies, CLSA and Kotak Institutional Equities have kept “buy” rating on the stock even as the lender reported 50 per cent drop in Q4 net profit due to surge in bad loans.

The private sector lender had on Monday posted a 49.6 per cent drop in its standalone net profit at Rs 1,020 crore in the fourth quarter ended March 31, 2018, with a sharp rise in its provisions for bad loans.

Gross non-performing assets as a percentage of gross advances rose to 8.84 per cent for the fourth quarter from 7.82 per cent in the December quarter and 7.89 per cent in the year-ago quarter. Net NPAs were at 4.77 per cent in the quarter ended March 31, compared to 4.20 per cent in the third quarter and 4.89 per cent in the fourth quarter a year ago.

Chanda Kochhar, Managing Director and CEO, ICICI Bank, said that the bank would focus on lowering net NPAs to 1.5 per cent by March 2020.

Asset quality trajectory has become clearer with a significant decline in “drilldown” list of potential troubled loans, says brokerage Emkay, retaining “buy” rating on the stock. Kotak says expects focus shifting towards growth and getting back to normalised return on equities, which looks achievable in FY2020.

Jefferies has raised the price target to Rs 380 from Rs 370; its says upgrades and recoveries in Q4 were strong sequentially. Out of 45 brokerages covering the stock, 42 have “buy” or higher rating, two have “hold” and one has “sell”; their median target price is Rs 390, according to Thomson Reuters Eikon.

As of Monday's close, the stock had shed 7.7 per cemt this year, compared with a gain of 1.2 per cent in NSE Bank index.

( With inputs from Reuters )

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