On Dec 18, 2014, we issued an updated research report on ICICI Bank Ltd. (IBN). The company’s deteriorating asset quality remains a major concern despite impressive retail deposit growth.
ICICI Bank has been witnessing a persistent decline in asset quality over the last several quarters. Further, we believe that there will be near-term pressure on asset quality due to an increased proportion of higher margin unsecured loans in the company’s portfolio mix.
Moreover, mounting operating expenses remain another major headwind for ICICI Bank. With the company continuing to strengthen its network, we anticipate non-interest expenses to rise going forward.
Given all these concerns, analysts have been bearish on ICICI Bank’s future performance. Over the last 60 days, the Zacks Consensus Estimate for fiscal 2015 declined 3% to 66 cents per ADR. For fiscal 2016, it fell 5% to 76 cents per ADR, over the same time frame.
On the flip side, ICICI Bank has been marketing retail deposits on a large scale, chiefly to lower its funding cost and create a stable funding base. As of Sep 30, 2014, retail loans grew 25.2% from the year-ago period. This makes the company well-positioned to deal with a more challenging rate environment.
ICICI Bank currently has a Zacks Rank #4 (Sell).
Stocks That Warrant a Look
Some better-ranked foreign banks include Grupo Financiero Galicia S.A. (GGAL), CorpBanca (BCA) and KB Financial Group, Inc. (KB). All these stocks sport a Zacks Rank #1 (Strong Buy).
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