Consistent healthy loan and deposit growth amid improvement in asset quality will help ICICI Bank Ltd.'s overall performance in the fourth quarter of the last financial year, but pressure on margin may weigh on the earnings, according to analysts.
The private sector bank, which will announce its March-quarter earnings on Saturday, is likely to report a standalone net profit of Rs 11,669 crore, up over 8% year-on-year. In the December quarter, the bottom line was Rs 11,792 crore, according to a poll by Bloomberg.
"We expect a PPoP (pre-provision operating profit) to grow at 10% YoY as we build in slower NII growth, led by recent cut in policy rates," Kotak Institutional Equities said in a preview note. "Loan growth is likely to be at 15% YoY, led by contribution from all segments with MSME likely to be growing faster."
ICICI Bank Q4 FY25 Estimates (Standalone, YoY)
Net profit seen up 8% to Rs 11,669 crore.
Net interest income seen rising nearly 9% to Rs 20,722 crore.
Net interest margin seen narrowing 13 bps YoY and 2 bps QoQ to 4.27%
Brokerages are expecting the bank's loan growth to be around 13.5–15% YoY, led by a broad-based traction across retail, MSME and corporate segments. On a sequential basis, loan book expansion is expected to be between 2.3% and 3.5%.
Deposit growth is likely to outpace loan growth on a quarterly basis, led by strong term-deposit mobilisation. On a YoY basis, deposit growth is pegged at 13.6%.
Most analysts expect the NIM of the bank to be slightly under pressure due to the recent repo rate cut and lagged deposit repricing. Kotak Institutional Equities has pegged a NIM contraction of 5–10 basis points on a quarter-on-quarter basis at 4.2%.
The NII growth will be slightly slower than average loan growth due to fall in yield on advances outpacing cost of deposits, which will be partially offset by lower interest reversals on Kisan Credit Card loan, according to Yes Securities. "Consequently, the NIM will be lower sequentially."
While Elara Securities expect a cut in the cash reserve ratio and lower slippages to support the margin, most brokerages agree that April–June quarter will see a greater impact from the policy easing.
Overall, asset quality of the bank is expected to improve, with slippages moderating sequentially, thanks to seasonality and recovery in KCC portfolio loans, analysts said. This, with steady recovery, will feed into lower non-performing-asset ratio and credit cost, Yes Securities said.
Kotak Institutional Equities has estimated slippages for the bank at 2% or around Rs 6,600 crore, while Elara Securities and Yes Securities foresee lower stress additions. However, provisions are likely to rise on a quarterly basis due to a low base in the December quarter.
The private lender is expected to report strong operational performance, supported by a stable fee income and controlled operating expenses.
Deven Choksey Research expects the cost-to-income ratio to improve to 38.6% from 39.2% in the previous quarter, aided by disciplined cost management.
Despite consistent delivery, ICICI Bank continues to trade at a valuation discount to HDFC Bank. Given the shift in relative metrics, Kotak Institutional Equities does not see a meaningful outperformance in ICICI Bank's shares from hereon.
All eyes will remain on the management's commentary on the NIM trajectory after rate cuts, deposit rate adjustments and implications, outlook for slippages, and provisions and guidance on loan growth.
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