Chanda Kochhar took over as Managing Director and Chief Executive Officer of ICICI Bank in May 2009. Since then, the bank’s performance on key parameters of deposits, advances, net interest income and adjusted net profit have been steady and have grown in the range of 13.5-15 per cent (compounded annual growth rate between FY10-FY17), according to standalone data provided by Capitaline .

But the growth in the bank’s share price at 7 per cent (CAGR in FY10-FY18) has lagged Nifty’s 10 per cent and Bank Nifty’s 14.4 per cent. This is because its non-performing assets (NPAs) jumped substantially, with gross and net NPAs rising at CAGR of 24 per cent and 31 per cent, respectively. These rates have slowed down to 22 per cent and 20 per cent year-on-year in the nine months ended December 2017. Even in terms of percentage, gross and net NPAs have been maintained at 7.8 per cent and 4.2 per cent, respectively.

 

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Stable NII

However, the high corporate exposure of the past continues to haunt the bank’s financial performance. While growth in deposits and advances y-o-y in the nine months ended December 2017 has slipped to 10-11 per cent, rise in net interest income came off to 8 per cent and adjusted net profit declined 26 per cent (also due to lower other income).

Nevertheless, the bank’s current and savings deposit ratio (CASA) and net interest margin were maintained at about 50 per cent and 3 per cent, respectively, as on December 31. Good performance on these two key profitability factors is encouraging as they are at least almost the same as March 31, 2017 levels. So net-net, the bank’s financial performance is ‘slowly’ coming back on track.

Analysts turn cautious

The company is expected to announce its March 2018 quarter results on May 7. Given the concerns surrounding lending to Videocon and future outlook on NPAs, analysts expect the stock, which is off 21 per cent from the 52-week or all-time high level hit on January 29, to remain under pressure. Sharekhan revised its rating on the stock to ‘Hold’ given the uncertainties.

Fitch Ratings has highlighted concerns, such as the question over the bank’s governance and reputational risks. “There is a potential risk of financial penalties, as well as legal action, if the investigation comes up with findings against the bank,” it said. However it has negated its own view by adding that the bank has relatively strong capitalisation and profitability. “Losses on the loan in question would be unlikely to significantly undermine ICICI’s financial profile - in particular, its core capitalisation would remain strong even if the loan were completely written off,” it pointed out. However, Jeferries recommends to buy the stock, while IDFC Securities has rated it an outperformer.

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