The country's second largest private sector lender ICICI Bank is expected to announce its first quarter result on July 25.
Analysts see around 60 percent year-on-year jump in Q1FY21 profit as stake sale in life and general insurance companies for capital during the quarter is likely to lift pre-provision operating profit by around 50 percent YoY.
The bank had sold 3.96 percent stake in its subsidiary ICICI Lombard General Insurance for Rs 2,250 crore, and 1.5 percent stake in ICICI Prudential Life Insurance for Rs 840 crore in June.
"We expect the bank to utilize Rs 3,200 crore from one-off gains from the stake sale in ICICI Prudential and ICICI Lombard to make additional COVID-19 provisions taking it from current 0.4 percent to 1 percent," Emkay Global said.
Net interest income, the difference between interest earned and interest expended, is seen rising in the range of 13-17 percent with loan growth of 7-12 percent in Q1FY21 YoY.
"We expect a pre-provision operating profit growth of around 50 percent YoY led by higher income from part stake-sale in life and general insurance. Loan growth would slow to around 7 percent and healthy NII growth (13 percent YoY). NIM (core) would remain stable QoQ at 3.9 percent," said Kotak Institutional Equities which sees profit growth at around 64 percent YoY.
Sharekhan also expects strong pre-provision operating profit growth of 50.7 percent and 62.9 percent growth in profit. Net interest income is likely to grow 15.6 percent with loan growth of around 12 percent YoY and stable NIM, it said.
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Brokerages largely expect increase in provisions YoY (decline QoQ), but asset quality is likely to see some further improvement with declining slippages.
"We expect the bank to make higher provisions either to reduce net NPLs or contingent provisions for COVID. Moratorium is likely to come off meaningfully as it has been given on a case-to-case basis. We don't see any major slippages on the corporate portfolio this quarter," said Kotak.
HDFC Securities, which expects 57 percent YoY growth in PPoP and 15 percent in NII, also said it had factored in higher provisions (up 71 percent YoY, albeit lower QoQ), as ICICI Bank proactively utilises the gains from stake sale in subsidiaries.
According to the brokerage, key things to watch out for would be incremental provisions towards COVID-19/ improvement of PCR; movement in BB and below-rated book and outlook on asset quality; details on the moratorium; subsidiaries' performance; and comments on proposed fund raise.
ICICI Bank share price fell 2.66 percent on July 24, ahead of its June quarter earnings. Overall it has been rangebound in last four months when the Nifty50 rallied 48 percent. It corrected 29 percent year-to-date.
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