ICICI slippages to be Rs 6500 crore in Q4: Angel

ICICI Bank set to announce its fourth quarter (Q4) results for FY16, the Street is expecting an asset quality performance similar to the third quarter. In an interview with CNBC-TV18, Siddharth Purohit of Angel Broking said that he expects more stress on the asset quality this quarter. The asset quality review (AQR) of the bank was not recognised in the last quarter, he said. He further said that Q4 may have a similar amount of slippages as in Q3 and expects them to be around Rs 6500 crore, while the bank’s net profit may remain flat. Below is the verbatim transcript of Siddharth Purohit’s interview with Latha Venkatesh & Sonia Shenoy on CNBC-TV18. Sonia: What is the expectation from the bank this time in terms of the key parameters like the asset quality, the net interest income (NII), slippages etc? A: As we know quarter three was a difficult quarter for ICICI Bank and the banking sector as a whole. This quarter again we are expecting similar trend we don’t expect any relief from asset quality for this quarter. As we know that ICICI Bank had not recognised some of the asset quality review (AQR) accounts and that is likely to come in this quarter as well. What we are basically expecting that similar amount of slippages what we saw in quarter three to the tune of Rs 6,500 crore is expected as slippages in this quarter. Overall stress is likely to remain on a higher side and that will take a toll on the earnings growth. That is why we are expecting that there could be a higher amount of interest reversal during this quarter. Hence, we expect that net interest could grow somewhere close to 8-9 percent only. However, there could be other income on a higher side because of dividend from overseas and subsidiaries as well as your recognition of stake sales from their subsidiaries. That could support the bottom-line to some extent. What basically we are expecting is that bottom-line to be more or less very flattish growth of around 4.5 percent for this quarter and to the tune of almost Rs 3,020 crore for this quarter. Latha: What do you make of management commentary? Do you think that there could be some accelerated recognition of what might happen in FY17 because management was not sounding very positive on FY17 either? A: As we saw in the few more banks accounts also like in case of Axis Bank also that since they had already recognised large part of AQR then also we saw slippages number coming up in a big way and there was a disclosure of large amount of stress account. So, similar thing can be seen in ICICI also. Possibly other than AQR also we believe that some spiller over could happen in FY17 also in terms of nonperforming loan (NPLs) recognition. That will keep the provisioning numbers very high than what we were expecting earlier and that is why we are little cautious on the earnings front. Sonia: What do you do with the stock now? I mean stock has been one of the biggest disappointments if you look at the last 12 months performance. Even this week the stock is down about 6 percent odd, it has come off quite a bit from its 52 week highs so do you expect to see more pressure purely because of the reasons you alluded to? A: If the disclosure are little on a better side let us say they are able to quantify the amount of NPL that is likely to come up in the next one year let us say then possibly that will be taken in a positive way rather than negative I would say. So, if there is more clarity in terms of asset quality then what is the quantum of asset they are looking forward to be recognised as other than the AQR accounts than I think that will be taken as positive thing? So, we will watch out for commentary from that side from the management. If you see since last quarter there has been some amount of uptake in the stock price. However, at the current valuation before taking a further call or may be upgrading the stock we would closely watch for the quarter four numbers and the guidance for FY17 because the crucial part is your provisioning numbers. As far as our numbers are concerned we are not upbeat so much on the FY17 growth numbers based on the current scenario. However based on the more disclosure we have the options to upgrade and may be expect better earnings going ahead. However, we will clearly watch for guidance from the management. So, as of now we have neutral stand on the stock. We are not really very positive; however, we will wait for management clarity before taking a further call on FY17 and FY18 earnings.