Icici Bank is the IBD Stock Of The Day, as the second-largest commercial lender in India posted better-than-expected earnings last week. IBN stock is breaking a trendline as it moves back toward highs.
Icici Bank posted strong loan growth and lower bad loan provisions in the fiscal third quarter ended in December, as economic activity picked up amid loosened pandemic restrictions near the end of 2021.
"While there has been a sharp rise in Covid-19 cases in recent weeks, the impact of the third wave has been mild so far," said CEO Sandeep Bakhshi in an earnings call with investors Jan. 22.
Icici Bank Earnings
The Mumbai-based bank posted earnings of 25 cents a share, an increase of 25% vs. the year-ago period. Revenue rose 18% year over year to $2.31 billion.
Provisions fell 27%, while net interest income gained 23% and net interest margin ticked up to 3.96% vs. 3.67% a year ago.
Retail loans grew 19% and accounted for about 61% of the total loan portfolio.
Icici has reported three straight quarters of earnings growth and two quarters in a row of revenue increases.
Iici Bank is also eyeing growth of its digital platforms.
"Leveraging digital and technology across businesses is a key element of our strategy of growing the risk-calibrated core operating profit," said CFO Rakesh Jha. "We have seen significant increase in the adoption of our mobile banking app, iMobile Pay. There have been 5.3 million activations of iMobile Pay by non-ICICI Bank account holders as of end December."
Meanwhile, larger rival HDFC Bank had less-impressive quarterly earnings. Its Q3 earnings grew 16% to 76 cents a share, while revenue rose 10.6% to $3.587 billion.
"ICICI Bank is in a sweet spot having emerged from the pandemic relatively unscathed, led by its superior underwriting prior to the crisis when it took fewer risks in the retail and SME (small and medium enterprise) segments," Kotak Institutional Equities Research said in a note, Reuters reported.
Kotak has a buy rating on IBN stock and a price target of $26.20.
IBN Stock
Shares rose 3.4% to 21.73 on the stock market today. IBN stock had a cup-base buy point of 22.24, with a breakout day on Jan. 12, but that failed as the stock tumbled as low as 20.43 intraday on Jan. 24.
However, many stocks briefly flashed automatic 7%-8% sell signals last week amid volatile market action, but rebounded to close well off those levels like IBN stock. Investors might still use 22.24, or perhaps 22.44, as an official entry.
Right now, IBN stock is breaking a trendline after finding support around its 21-day line, according to MarketSmith chart analysis. This might be a safer entry than waiting for a move to a new high. Investors could buy IBN stock here, using Friday's low, 20.44, as a stop.
IBN's relative strength line is ticking upward, right at its best levels in nearly two years. Its RS Rating is 91 out of a best possible 99, while its EPS Rating is 78, just below the 80 and higher IBD recommends.
HDFC Bank shares rose 4.8%, popping back above their 50-day line.
Follow Adelia Cellini Linecker on Twitter @IBD_Adelia.
