Sentiment improves for ICICI Bank

It is difficult to draw a simple good or bad conclusion from ICICI Bank’s September quarter results. The headline numbers were on expected lines. But, a gradual rundown into the profit and loss statement and the investor presentation could tempt you to change your opinion.Gains of Rs 5,682 crore from the listing of its life insurance business were used to prop up the provisioning for stressed loans, Rs 7,083 crore in the quarter. It was the bank’s highest since the Reserve Bank of India mandated that lenders formally recognise potentially bad loan assets. Likewise, core operating profit shrank 14 per cent year-on-year to Rs 4,224 crore.    Stock Market Astrology

Slippage remained high at Rs 8,030 crore, largely from corporate and small & medium enterprises (SMEs). However, it has marginally cooled from June quarter levels. Slippages from the watch list and non-stressed book (or standard assets) are expected to remain sticky in FY17. 

Analysts at Morgan Stanley highlight that non-performing asset (NPA) formation outside of the watch list and restructured loans were elevated, at two per cent of loans or on an annualised basis nearly 20 per cent of slippage. “This is high, compared to other private retail banks at 1-1.4 per cent of loans,” they add in their note.  Intraday Trading Tips

R Sreesankar, head of research at brokerage Prabhudas Lilladher, adds the management’s refusal to give any colour on their SMA1 and SMA2 dues was disappointing. SMAs or Special Mention Accounts are standard loan accounts which exhibit early warnings signals on repayment. Also, while the watch list declined by 16 per cent sequentially to Rs 32,490 crore, a large part of this is due to NPA recognition. Analysts aren’t pleased with the little information shared on recovery and upgrades.   Commodity Trading Tips

If all these are added, the Street is bracing for elevated provisioning and bad loan stress. Jefferies has increased its estimates on provisioning for bad loans from Rs 9,788 crore in FY17 to Rs 14,204 crore. “We would have liked more provision build-up as slippages remain elevated,” the analysts highlight in their report.    Future & Option Trading Tips