ICICI Bank Share Prices Soars 5%, Is it the Chanda Kochhar Factor?

The private lender ICICI Bank found favor in the eye of investors in yesterday’s trading session despite the bank posting a weak June 2018 quarter (Q1FY19). The share price of ICICI Bank surged more than 5% on BSE with an intraday high of Rs 308.35 per piece, however, it ended at Rs 307.25 per piece above by Rs 13.95 or 4.76% on the index.

The bank made a net loss of 1.20 billion rupees ($17.47 million) in the three months to June 30, compared with a profit of 20.49 billion rupees a year earlier. Analysts on average had expected a net profit of 14.62 billion rupees, according to Thomson Reuters.

The weak ICICI Bank Q1FY19 quarter did raise a red flag for many experts, however, a majority of them maintained a 'buy' ratings on the bank.

ICICI Bank’s net loss can attributed to higher provisions parked for recovering gross NPA.

There was a deterioration in bank's asset quality, with gross non-performing assets (NPAs) or bad loans widening to 8.81% of the gross advances as on June 30, 2018, compared to 7.99% by June last year. Meanwhile, there was a significant jump in provisioning and contingencies at Rs 5,971.29 crore for the said quarter as against Rs 2,608.74 crore earlier.

The provision coverage ratio on nonperforming loans, including cumulative technical/prudential write-offs increased by 560 bps sequentially to 66.1% at June 30, 2018, further strengthening the balance sheet.

Many analysts have increased their slippage target for the bank looking at the rise in stressed assets. But they have also estimated improvement in asset quality ahead.