InvestorQ : I recently bought shares of ICICI Bank at over Rs.400. Since the bank has shown fall in profits, should I sell out of the stock?
Crowny Pinto made post

I recently bought shares of ICICI Bank at over Rs.400. Since the bank has shown fall in profits, should I sell out of the stock?

Answer
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Aashna Tripathi answered.
1 year ago


ICICI Bank has seen a sharp rally in stock price in the last few months, especially after the NPAs of the bank showed signs of bottoming out in the last two quarters. Let us first look how the fourth quarter results panned out.

How were the ICICI Bank Q4 results?

Net profits of the Bank fell by 5% to Rs.969 crore for the fourth quarter and the total net interest income (NII) of the bank was up by 27% at Rs.7620 crore. The net interest margins (NIM) of the bank has also moved up from 3.40% to 3.72% in the latest quarter. Even on the NPA front, the gross NPAs fell from 7.75% to 7.38% while the net NPAs fell to 2.06% indicating that most of the NPAs were provided for. The reason for the fall in profits was that other income fell sharply by nearly 40% to Rs.3621 crore in the fourth quarter while the provisions were up by 30% at Rs.5451 crore.

Should you exit the ICICI Bank stock at current prices?

Since the lows of last July, the stock of ICICI Bank has rallied nearly 60% with not a great shift in fundamentals. The bank will benefit from recoveries under the NCLT this year but that and a lot more is already in the price. For example, the stock is currently quoting at above the industry average P/E which is a tad too rich for a bank with gross NPAs of nearly 7.4%. We suggest switching to other private banks like Kotak Bank, HDFC Bank or RBL Bank that offer better value at the current juncture.