Responding to concerns over the bank’s quarterly performance, Aditya Shah, Founder, Hercules Advisors played down worries around asset quality and provisioning, pointing out that the numbers reflect temporary factors rather than a deterioration in fundamentals.
“Oh, absolutely not. I am not too much concerned. The asset quality has shown a mild improvement. The bank states that in Q3 there was some Kisan Credit cost that they had got, which led to an increased provisioning of about Rs 5,300 crore. So, from my perspective, I do not think this is any bit of concern,” Shah said in an interview to ET Now.
He highlighted that advances grew at around 11.5%, which he described as reasonable in an environment where system loan growth is in the 10% to 15% range. Deposit growth stood at about 8.7%, while asset quality improved marginally from 1.58% to 1.53%. “These are fairly steady numbers. I am okay with the numbers, and I do not think the stock price will do anything positive given these numbers,” he added, noting the absence of any major positive or negative surprise.
A key area of discussion was provisioning linked to Kisan Credit Cards. While ICICI Bank acknowledged the impact, it did not provide a detailed break-up. Shah acknowledged the lack of clarity but remained unfazed.
“That is correct. The last NPA additions were about Rs 5,356 crore, which they have not given a split for. I think that will be given during the call, and they will explain what was the impact of those credit cards,” he said. According to Shah, for a large bank like ICICI, quarter-on-quarter fluctuations in asset quality are not unusual. “The performance is steady. Nothing to complain about, but there is no upside to the stock given these results.”
ET Now anchors, however, flagged a sharp rise in provisioning compared to the same quarter last year, with provisions nearly doubling to around Rs 2,500–2,600 crore. This, along with a dip in return on assets from 2.3% to 2.1%, raised questions over whether the numbers were a miss versus expectations and whether the stock, trading at around three times book value, could see pressure in the near term.Addressing these concerns, Shah conceded the possibility of a short-term reaction in the stock but stressed the importance of understanding the nature of slippages.
“I do not think there could be a little bit of downturn in the stock. See, even Sachin does get a low score at some point in time during his career. The slippages, we need to first understand from the management how many of them were one-offs and how many were actual slippages that the bank experienced,” he said.
He added that while the stock could see some pressure initially, recovery is likely once clarity emerges. “The stronger point is loan growth is fairly okay, deposit growth is fairly okay. Slippages, we need to understand where they are coming from. Given the stability at ICICI Bank, only asset quality will decide what really happens, and the details of that will come on the concall.”
On leadership and longer-term prospects, Shah credited CEO Sandeep Bakhshi for steering a turnaround at the bank after the exit of Chanda Kochhar, while also flagging the need to monitor succession planning.
“From my perspective, Sandeep Bakhshi did script a big turnaround in ICICI Bank. This is a mild negative in the near term. However, the street will always see over the next one or two years who is being groomed to take the baton from him,” he said. Drawing parallels with leadership transitions at other large banks, Shah remained confident in ICICI Bank’s institutional strength. “ICICI Bank is a strong enough bank that they will find good people to lead. However, we need to clearly monitor this development.”
Overall, the consensus view emerging from the discussion suggests that while ICICI Bank’s Q3 numbers may lack excitement and could trigger a knee-jerk reaction, the underlying business remains steady, with asset quality trends and management commentary likely to shape the stock’s direction in the weeks ahead.