Reporting mixed set of performance in Q2FY17, ICICI Bank PAT at INR 31 bn stood sequentially higher largely supported by one-off gains from to the tune of INR 56.82 bn emerging from IPru stake sale that helped beef up provisions against elevated asset quality stress. The stringent balance sheet repair put up elevated slippages at INR 80 bn for second consecutive quarter; however, watch-list exposure declined 16% Q-o-Q to INR 324.9 bn . Consequently, the overall stressed assets too tapered down; declining to 10.4% of overall asset base. While the provisioning for the quarter stood exceptionally higher (182% Q-o-Q increase), the bank made additional provisions towards standard loans, loss NPAs and floating provisions and stands adequately provided on the wage related front. While the flat NIMs (3.1% - Q2FY17) and higher delinquencies impacted NII, the improvement in portfolio mix (53% emerges form retail/MSME), strong retail lending accretion (21% Y-o-Y growth), cost efficiencies and significant capital on balance sheet with sufficient cushion from value unlocking in subsidiaries should aid ICICI Bank to put up improved operating metrics ahead.
UPGRADE BUY. Q2FY17 performance stood mixed with headline asset quality standing elevated; yet receiving major support from the one-off stake sale gains. However, higher provisioning for contingent times coupled with stringent balance sheet repair and ameliorating retail franchise are key positives for the strong operating show ahead. While the asset quality disappointment was on expected lines, reduction in watch-list exposure and resultant decline in overall stress loans coupled with huge provisioning buffer brings respite. While asset quality is not yet out of woods, the improvement in portfolio mix, strong retail lending accretion, cost efficiencies and significant capital on balance sheet with sufficient cushion from subsidiaries should aid ICICI Bank put up consistent quality show on operating metrics.
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