Icici Bank shares rise 2% as D-Street encourages sharp drop in bad debt provisions

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To buy to sell ICICI Bank to share

Shares of ICICI Bank rose 2% in early morning trading on Monday days after the private lender posted nearly 50% growth in autonomous profits for the quarter ended June, provisions for doubtful debts having fallen sharply and the quality of assets having improved.

Shares of the bank have gained over the past six days and are up 7.04% over the period.

Market expert Prakash Diwan believes that ICICI Bank might not give that delta, but investors would be happy to have it in the portfolio. “However, it might not create incredible alpha in the future as much as smaller banks would,” Diwan said.

Dhiraj Agarwal of Ambit Capital said ICICI Bank continues to be their top choice in banking along with State Bank of India (SBI).

“I think we will continue to hold and continue to buy ICICI Bank shares. We have seen in the past that this overcrowded business concept or consensus business concept doesn’t really matter. If the company continues to perform and to deliver, the share price continues to climb. We see more upside in ICICI Bank, it is our top choice in the banking sector,” Agarwal said.

JM Financial Services has a “buy” rating on ICICI Bank shares in the Rs 800-805 band, said Ashish Chaturmohta, director and head of research. “It looks like a promising bet with Rs 790 as a trade stop loss, and we expect Rs 850-860 in the short to medium term in the stock,” Chaturmohta said.

According to Krishnan ASV, Principal Analyst-BFSI at HDFC Securities, most major mutual funds are neck deep on ICICI Bank, especially given what is happening with other private sector banks. “It has almost become a unique profession. So to that extent, I wouldn’t be surprised if almost every major mutual fund is neck-deep,” ASV said.

What else has helped ICICI Bank to make a profit

In addition to improving the quality of assets (as shown in the table below), the bank’s basic net interest income (NII) increased by 21% to Rs 13,210 crore on the back of a 21% increase in overall lending. The net interest margin (NIM) widened to 4.01% from 3.89% a year ago.

Non-interest income was impacted by lower cash earnings to Rs 36 crore from Rs 290 crore a year ago, while fee income rose 32% to Rs 4,243 crore.

After the results were announced, ICICI Bank chief executive Sandeep Batra said new provisions had been made due to what he called “market volatility”.

ICICI Bank, in its conference call on Saturday, also said the lender saw 35% growth over the previous quarter in spending by non-ICICI Bank customers on the digital app.

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