ICICI Bank stock rises over 9% after post Q2 earnings.

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The ICICI Bank stock rose in early trade today after brokerages raised target price on higher net interest margins (NIMs), reduction in provisions and NPAs in the second quarter earnings this fiscal. The bank logged net profit of Rs 1,204.62 crore, down 42% year-on-year (YoY) but beat analysts’ estimates. The lender posted a consolidated net profit of Rs 2,071.38 crore in the corresponding quarter a year ago.

The stock rose up to 9.20% or 29 points to hit an intra day high of 344 level on the BSE. It opened at 328.90 today compared to the previous close of 315.05 on BSE.

The stock has gained after two days of consecutive fall and opened with a gain of 4.40%. The stock has gained 9.14% since the beginning of this year and has risen 13.59% during the last one year.

40 of 44 brokerages rate the stock “buy” or ‘outperform’, three “hold” and one “underperform”, according to analysts’ recommendations tracked by Reuters.

“ICICI’s results stood out, and money is moving there, which is much cheaper than Kotak and HDFC,” said Naveen Kulkarni, head of research at Reliance Securities. “ICICI, which has been lagging the other two banks, could now be playing catch-up.”

Brokerages became bullish on the stock after overall provisions reduced to Rs 3,994.29 crore from the Rs 4,502.93 crore in the year-ago period, while the provision coverage ratio improved by over 4.80 percentage points to 58.9 per cent.

Positive sentiments around the stock were also aided by a 20 per cent rise in retail loans and deposit growth at 12 per cent.

Motilal Oswal said, “The Q2 earnings signalled improving margins and steady loan growth. Asset quality improved as fresh slippages subsided to Rs 3,120 crore – the bank also guided for a  significant decline in non-performing loans formation over FY19.”

The brokerage gave a ‘buy’ recommendation and raised its target price on the stock by 27%.

BNP Paribas too retained its buy recommendation and raised its target price to 410. “ICICI retained its FY20 guidance of 15% return on equity, focus on retail (60% of the loan book) & net NPA target of 1.5% – possible. The standalone FY20 expected price to book ratio of 1.2 times provides a good opportunity for investors to get in, the bank said.

Jefferies said ICICI remains one of its preferred stocks; brokerage expects continued core pre-provision operating profit (PPoP) growth over next 3-4 quarters as net interest margin starts expanding, loan growth picks up and asset quality normalises

CITI gave a buy rating to the stock with a target price of Rs 390. Net interest margins improved. Bank continues to focus on improving core operating profit and is well positioned in terms of assets and liability management with high current account and savings account ratio and high share of floating rate loans, which should drive net interest margin expansion, the brokerage said.

Macquarie said profits were better than expectations due to higher NIMs and key positives were lower slippage and better loan growth. The brokerage gave a target price of Rs 416 on the stock.

Nomura maintained a buy call on the stock and raised its target price to Rs 415 (from Rs 375). The brokerage believes that return on equity (ROE) recovery will be faster than expected. It raised its FY21 forward estimates by 5% and return on equity to 15%

Morgan Stanley said asset quality of the bank is strong. It gave a target price of Rs 460 and said the bank is one of their preferred stocks. Over the next three -four quarters, the brokerage sees continued core pre-provision operating profit (PPoP) growth as NIM’s start expanding, loan growth picks up and asset quality normalises.

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