ICICI Bank's impairments hit record high at 8.4% of loans in 4Q15

The RBI's insisted to recognise stressed sectors.

Impairments during the quarter were a historic high of INR87b or 8.4% of loans, according to Maybank Kim Eng. Regulator’s (RBI) insistence to recognise stressed sectors loans as NPLs resulted in the sharp jump. With commodities prices remaining weak, management guided for a weak asset quality outlook next quarter as well. We think the current clean-up act is a step in the right direction. Post the recognition of stress, the overhang on the stock will subside.

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ICICIBC’s recurring PAT was 35% below our and the consensus estimates on higher NPL provisions. A profit on stake sale in insurance JV helped cushion earnings. Stress from the iron & steel and infrastructure sectors led to five year high GNPLs of 4.7%. 4Q earnings will be supported by a gain of INR22b on the sale of the general insurance business. We cut our FY17F earnings by 10% to factor in higher credit costs.