Sunday, April 29, 2012

ICICI Bank surprises Dalal Street

ICICI Bank Ltd’s March quarter earnings have bettered Street expectations by a large margin for a second straight quarter and has gained on the browsers accordingly. Net profit rose to 1,902 crore a gain of 31% from a year ago is a good reason for investors to get attracted .

Positive side of the results is  a 35% rise in operating profit, which was more than double the growth seen in the December quarter.  Other is a drop in Gross non-performing assets by 85 basis points. GNPA  as a portion of the loan book is now 3.62%.

On the second point there is a catch and so it is advisable to go cautious on this counter. GNPA has reduced, but  restructured loans have risen to 4,256 crore. That was a 39% increase over December.  This may indicate loss of opportunity indirectly or  an effort to give a new lease to the NPAs.  Bad loans are as high as 9,475 crore.

For short term gain one can remain invested till the mood is positive and not much of the post mortem of financial numbers get revealed. ICICI Bank trades at 1.58 times its estimated book value for fiscal 2013, which is lower than  HDFC and Axis Bank which are traded at 3.67 times  and 1.75 times respectively.  Both of them are stronger on the retail banking  a more secured segment.  

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