However, the bank is nearing its asset quality downturn and improvements are in sight.
ICICI booked slippages worth $2.28b (INR154b) in Q4, according to Maybank Kim Eng, as stress loans previously classified as ‘restructured’ were moved to NPLs.
The bank’s gross year-end bad loans also rose 1.3 ppts QoQ to 10% as ICICI’s slippages prompted a 37% YoY decline in earnings per share.
However, things are starting to look up for the embattled private sector lender as Maybank Kim Eng believes it is approaching the end of its corporate NPL cycle. Gains from its stake sale in a subsidiary were used to improve provisioning coverage and the bank is now shifting its focus on credit-cost normalisation and growth led by the retail and SME arms.
“We expect fresh slippages to fall substantially in FY19E. Near-term credit costs could remain elevated due to high provisioning requirements. They should trend down in 2HFY19E,” analyst Vishal Modi forecasted.
Here’s more from Maybank Kim Eng:
Visible improvements were led by its retail and SME segments. FY18 ended with 10.4% loan growth, up from 6.7% last year. The bank plans to lift retail loans in its mix to over 60% by FY20 from 57%. CASA accretion helped its deposit base expand by 15% YoY.
With its CAR at 18.4%, ICICIBC should be in a solid position for a 15% loan CAGR in FY19-21E. We forecast average credit costs of 1.6% for FY19- 21E, down from 2.7% in the previous three years. A pick-up in loan growth, cost-control and normalising credit costs are expected to support a rebound in ROEs to 14-15%.
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