ICICI Bank extends losses, down 4% on tepid Q4 numbers

NEW DELHI: Shares of ICICI Bank dropped over 4 per cent in Monday's trade in addition to a 1.5 per cent fall on Friday, after the bank reported a 76 per cent drop in net profit to Rs 702 crore on account of Rs 3,600 crore extraordinary provisions that it had made during the quarter in anticipation of more loans turning bad.

The stock declined 4.14 per cent to hit a low of Rs 226.80 on BSE.

Brokerage Nomura has cut the target price for ICICI Bank to Rs 285 from Rs 300 earlier, but maintained a buy rating on the stock.

Nomura said it has downgraded the bank’s EPS estimate following weakness in pre-provision operating profit (PPOP), but it continued to maintain buy rating on the stock “due to reasonable valuations of 1.1x FY18 Book.”

The company has made provision of Rs 3,326 crore for non-performing assets, as mandated by the Reserve Bank of India. Higher NPAs has led to 25-30bps NIM contraction, guidance for FY17, it said, adding that the stress book disclosure was within expected range.

CLSA and Kotak Securities too have maintained buy ratings on the stock with a target price of Rs 320. CLSA said it has retained the stock under its ‘High Conviction’ buy list.

Adjusted profit post the provisions was marginally below the brokerage’s estimate. Following the numbers, CLSA has cut earnings estimate for FY17-18 by around 25 per cent to factor in higher slippages and slower growth.

That said, the brokerage has recommended buy, given its strong deposit franchise and well-capitalised levels. Disclosures on stressed loans will reduce uncertainty for the lender, it said.

“Provisions indicate that FY17 could be challenging, if efforts taken don’t take shape,”said Kotak Securities. “We prefer the lender due to its shift towards low-risk business and strong liability franchise. Disclosures have improved but need a few more quarters to derive comfort,” it added.