Bad loans at ICICI Bank have never been this low in the last seven years

• Shares of ICICI Bank surged over almost 10% to hit one year high of ₹827 as investors cheered the lender’s strong profit growth in September quarter.
• The bank’s net non-performing asset ratio stood at 0.99%, the lowest since December 31, 2014.
• Analysts expect the bank’s shares to give better returns led by strong credit growth momentum, digital push, and low bad loans.

ICICI Bank has become the top performer on the benchmark index Nifty 50 on Monday with its shares rising almost 10% hitting its one-year high.

The lender’s strong profit growth of 30% year-on-year to ₹5,511 crore impressed investors on the back of low bad loans. Net non-performing assets (NPA) ratio i.e. the ratio of NPA to net advances (loans) declined to 0.99% in the September quarter, the lowest since December 2014.

The lender attributes the strong performance to the increase in economic activity, which increased disbursements across all retail products in the July-September quarter.

Analysts expect the bank’s shares to give better returns led by strong credit growth momentum, digital push, and low bad loans.

“We expect return ratios to improve on account of strong credit growth momentum, digital push leading to moderation in operating expenses, and high provisioning coverage ratio providing comfort on the credit cost front,” said a report by Edelweiss Securities. Return ratio means a company's ability to generate returns for its shareholders.

Meanwhile, the bank’s provisioning coverage has improved to 80%, which will secure the lender better from any potential loss in loans.

ICICI Bank’s retail loan portfolio saw good improvement led by 27.9% growth in credit cards, 25% in mortgages and 18.2% in personal loans.

The lender’s credit card segment is flourishing in comparison to other players. In August, ICICI Bank grabbed market share from leading player HDFC Bank that was banned from launching new credit cards until August.

The bank says customer spending across most categories other than travel have improved in the last six months.

Further, most analysts have maintained a ‘buy’ recommendation on ICICI Bank’s stock and expect the stock to rise further. At 10:16 a.m. on October 25, shares of the lender were trading 9.8% higher at ₹835.

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