For private lender, ICICI Bank, much like its peer Axis Bank, the December quarter performance has been comforting. Strong improvement in core performance and moderation in slippages are likely to offer some respite to investors, struggling with nearly three years of muted performance by the bank.

A key positive is the gross slippages number of ₹2,091 crore for the latest December quarter. The bank’s slippages were near around this range of ₹1,600-2,200 crore until the December 2015 quarter, when the slippages first shot up. That said, further moderation in slippages and sustainability of pick up in loan growth, will remain key factors to watch out for in the coming quarters.

Slippages down

ICICI Bank had reported sharp slippages of ₹15,737 crore in the March quarter — a chunk of it due to RBI’s new framework for stressed assets — which in effect did away with all the old restructuring schemes. Gross slippages in the June quarter, remained elevated at about ₹4,000 crore. In the September quarter, while the slippages moderated notably to ₹3,117 crore, they were still above the bank’s past quarterly additions to bad loans (prior to December 2015 quarter).

In the latest December quarter, however, the fall in slippages is noteworthy. Nonetheless, asset quality will be keenly watched in the coming quarters.

Pick up in core performance

On the core performance front, the steady improvement in recent quarters has been heartening. After several quarters of single-digit growth, net interest income has risen notably since the September quarter, growing a healthy 21 per cent in the December quarter. The bank’s credit growth has seen a steady rise over the past two to three quarters, thanks to strong show in the retail segment. In the latest December quarter, its credit grew 14 per cent YoY, driven by 22 per cent growth in retail loans.

However, sustainability of this improvement in core performance will be critical for earnings.

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