Shares of ICICI Bank surged more than 6% in the stock markets today despite reporting a 50% slump in Q4 profit. Despite the decline, the bank’s Q4 profit fell in line with the expectations of industry analysts. In the Bombay Stock Exchange, ICICI is currently trading at a price over Rs.308 which represents a gain of over 6% from yesterday’s closing price.
The surge in share price after the Q4 results can be attributed to Morgan Stanley raising its target price on ICICI Bank shares to Rs.425 per share. Morgan Stanley also noted that the bank’s asset quality is on its way to normalisation.
In the fourth quarter ended March 2018, ICICI Bank reported a net profit of Rs.1,020 crore, down 49.6% from Rs.2,024.6 crore in the fourth quarter of the previous fiscal year. Before the release of Q4 results, a Reuters poll had provided an estimated Q4 profit of Rs.955.7 crore.
Despite the major slump in Q4 profit, Morgan Stanley noted that ICICI Bank is likely to show better results in fiscal year 2019 as lead prices have corrected. The bank’s net interest income for the fourth quarter increased marginally to Rs.6,021.67 crore from Rs.5,962 crore in the fourth quarter of the previous year.
One of the major reasons attributed to the profit slump is the drastic increase in non-performing assets (NPAs). The bank reported a 17% increase in bad loans during the quarter. The percentage of NPAs increased from 7.82% of total loans to 8.84% of total loans. In terms of monetary value, the total value of NPAs reached Rs.54,063 crore in the March quarter.
The bank is currently taking steps to bring down the total amount of NPAs. In its earnings statement, the bank’s CEO Chanda Kochhar noted that the bank is currently focusing on bringing down the NPAs under 1.5% by the year 2020.
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