ICICI Bank should be treated as one data point

ICICI Bank is an important example for beginners who want to understand how a large private-sector bank creates shareholder value. The latest market development is particularly interesting: Goldman Sachs has initiated coverage on Indian banks and identified

among its top banking choices, citing improving loan growth, liquidity, net interest margins and stable asset quality. For a beginner, the important lesson is that banking stocks should not be evaluated only by share-price movement. Investors should study loan growth, net interest margin, gross and net non-performing assets, provision coverage, credit costs, capital adequacy and return on equity. A bank can grow its loan book rapidly, but if asset quality deteriorates, future profitability can suffer. Therefore, the current positive commentary on ICICI Bank should be treated as one data point rather than a reason to blindly buy the stock.