We are watching very closely the banking sector numbers of India, as almost quarter of our portfolio today is invested in the banks. ICICI Bank, another big private sector player reported its first quarter results for 2017 which looks like this:

ICICI Bank Q1 – 2017 Q4 – 2016 Q1 – 2016 %Change Q-Q % change Y-Y
Total Income 16,759.51 18,590.86 15,802.45 -9.85% 6.06%
Net Interest Income 5,158.52 5,404.51 5,115.09 -4.55% 0.85%
Net Profits 2,232.35 701.89 2,976.16 218.05% -24.99%
Deposits 424,086.18 421,425.71 367,876.98 0.63% 15.28%
Advances 449,426.53 435,263.94 399,737.61 3.25% 12.43%
Gross NPA 27,193.58 26,221.25 15,137.61 3.71% 79.64%
Net NPA 15,040.70 12,963.08 6,333.31 16.03% 137.49%

 

ICICI bank had reported very disappointing results for its first quarter. Total income and net interest income had hardly seen any growth, giving us picture of pressure on its margins. Deposits and Advances had seen a bit of growth but same time NPA’s and especially net NPA’s had raised concerns over its asset quality.

Many analysts in the market are expecting net profits for ICICI bank to be in range of Rs 8,245 – Rs 12,195 for 2017 and Rs 9,815 – Rs 16,610 for the 2018 financial year. ICICI Banks today’s market price is pointing profits of far ahead of Rs 12,000 crore in 2017 and close to Rs 15,000 crore in 2018.

We invest or our analysis is on probabilistic method, which means we look at how bright the chances are for the banks to achieve those numbers. Looking at present numbers, there is a good chance for the bank to report its 2017 earnings around Rs 10,000 crore and for 2018 around Rs 12,500 crore.

If we punch in the analysts’ earnings expectation, then its 2017 intrinsic value spectrum as per our calculations comes in range of Rs 76 – Rs 161 and for 2018 in range of Rs 99 – Rs 261 per share.

Aziz Dodhiya is the chief investment officer for the Valueoperations funds which operates in the Indian market as an FPI (Foreign Portfolio Investor). We do not offer any personal advice to buy or sell any stocks and the views that are shared by Aziz might not incline to your personal investment strategy and this is the reason we advise you to take professional advice before going ahead with our views.