(Bloomberg) -- Analysts remained overwhelmingly positive on ICICI Bank Ltd. after India's second-largest private lender posted a record quarterly profit, helped by lower provisions for future bad loans. Its shares climbed as much as 6.6%, the most since June 3.
Net income at the bank rose to 42.51 billion rupees ($574 million) in quarter ended Sept. 30 from 6.55 billion rupees a year earlier. The results was about 48% higher than the average analyst estimate. Net interest income rose 16% from a year ago, and the bank didn't make any additional provisioning for pandemic-induced bad loans after front-loading a large amount in the June quarter. Soured loans dipped from the level in June and President Sandeep Batra said he expected a “more normalized” financial year starting in April.
ICICI Bank has 54 buy recommendations, with no holds or sells. Here's what analysts had to say about the the results.
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Bloomberg Intelligence (Diksha Gera)
- The bank is better positioned than smaller and most public-sector lenders in India to defend earnings in fiscal 2021.
- Its net interest margin may be supported by its strong deposit franchise, but credit demand revival is key.
- ICICI's loan growth may beat peers as it takes market share from public banks and shadow lenders; bad-loan formation amid lockdown warrants a closer watch.
Motilal Oswal (Nitin Aggarwal)
- The bank's control over operating expenditures and lower provisioning helped drive earnings growth.
- Business trends are improving, with loan disbursement reaching pre-Covid levels and even higher in some segments.
- The deposit base continues to improve, with cost of deposits declining to 4.2%, while the lower credit-deposit ratio provides strong opportunity for growth.
- Expects annual return on assets to reach 1.4%, return on equity 12.8% in FY22
- Maintains buy, with a price target of 525 rupees
Prabhudas Lilladher (Pritesh Bumb)
- Collections efficiency for overdue loans is improving to near pre-Covid levels; overdue loans are still 3%-4% higher than pre-pandemic levels and should improve going forward.
- The bank sees a low level of loan restructuring.
- The lender has a strong franchise, high capital level and is fully covered on legacy bad loans, with provisions related to Covid lower than anticipated.
- Retains buy, raises price target to 520 rupees from 462 rupees
Dolat Capital Market (Mona Khetan)
- Sequential improvement in fee growth, decline in provisions and a lower tax rate resulted in RoA of 1.5% for the quarter.
- While stress in loans to companies still needs to be watched, the bank's prudent provisioning, strong capital position, healthy deposit base, digital capabilities and market-leading subsidiaries provide confidence.
- Maintains buy, with a price target of 510 rupees
JM Financial (Sameer Bhise)
- Loan collections are rapidly normalizing, with repayments overdue from individuals and small and mid-sized companies only marginally higher than pre-Covid levels.
- Sees bank reverting to near-normal credit costs in FY22.
- Bank's growth opportunities are in select retail segments like mortgage, rural and auto.
- Core banking business still trades at inexpensive valuations despite a surge from March lows.
- Maintains buy, with a price target of 475 rupees
©2020 Bloomberg L.P.
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