ICICI Bank Q2 Results Preview: Net profit is anticipated to increase by 25% YoY as margins hold steady

 ICICI Bank Q2 Results Preview: Net profit is anticipated to increase by 25% YoY as margins hold steady

On Saturday, September 21, ICICI Bank, the second-largest private lender in the nation, will release its financial results for the three months that concluded on September 30, 2023. For the previous several years, the lender has reported significant growth and profitability.

Despite a reduction in net interest margins (NIM), the banking industry as a whole is anticipated to post robust profitability in Q2FY24. The retail and SME divisions are projected to continue to gain pace, supporting systemic loan growth.

In the meanwhile, experts said that the banking system's deposit growth has increased to 12.8% YoY (adjusted for merger), helped by a stable base, the end of the 2,000-yen bill, and a higher real rate of return.

During the July–September quarter of FY24, ICICI Bank is anticipated to record excellent net profit growth and net interest income (NII) growth, while net interest margin (NIM) is anticipated to stay constant.

Slippages at the bank have decreased over the last several quarters and are probably going to stay in check. According to experts, the lender is well-protected by increased provisions on its balance sheet and does not anticipate using these provisions in the near future.

The re-pricing of liabilities and the influx of SA deposits into TD would keep financing costs high and put pressure on margins. Margin had bottomed out in Q4FY23 at around 4.9%. Since almost 70% of the book is floating, the majority of the asset re-pricing has already taken place, and loan rates may continue to stagnate, according to brokerage company Motilal Oswal Financial Services.

The brokerage thinks that because to ongoing technological investments and collaborations with new ecosystem participants, ICICI Bank is emerging as a growth leader in the SME and Retail divisions. Over the bank's FY23–25 period, a loan CAGR of 18% is anticipated. 

The net profit of ICICI Bank in Q2FY24 may increase by 27.8% to $9,660 crore from $7,557.8 crore in the same period of the previous fiscal, according to Motilal Oswal. It anticipates NII to increase by 24%, from $14,786.8 to 18,330 crores, year over year.

Expect solid loan growth, driven by the retail and SME areas. Expect credit costs to stay in check, helped by sufficient buffers for unforeseen events. The brokerage company predicted a potential compression of the margin trend.

Because of the growing cost of funds, Emkay Global Financial Services anticipates that ICICI Bank's margins would decline on a QoQ basis; nevertheless, lesser provisions should improve profitability.

In the current quarter, it anticipates that net profit would increase by 29.5% to Rs 9,787 crore and NII will increase by 22.6% to Rs 18,134 crore.

As NIM is turning around from high levels, Kotak Institutional Equities anticipates pre-provision operating profit (PPoP) to increase at a 20% YoY rate. 

"Loan growth will be strong at 16%, with contributions from all categories leading the way. We anticipate a 25 bps QoQ drop in NIM to 4.3%. Given the present economic climate, we anticipate provisions to stay modest as we see fewer slippages. We are constructing with 2% (or 5000 crore) slippages. The reversal of NIM would be of particular concern since the sector's cost of capital is beginning to rise quickly, particularly given the slower CASA expansion, according to Kotak Institutional Equities.

The share price of ICICI Bank has stayed constant this year. Only 5% of the stock has increased thus far this year. Shares of ICICI Bank have decreased more than 5% during the last month. However, during the last three years, the share price of ICICI Bank has increased by almost 125%.