Mumbai: ICICI Bank posted a 44% jump in quarterly net profit on strong demand for loans and a rise in fee income in India’s fast growing economy, but missed forecasts due to treasury losses and higher expenses and its shares fell.
The No.2 Indian lender and its rivals State Bank of India and HDFC Bank are seeing an improvement in their asset quality as positive business and consumer sentiment help lower loan defaults.
But loan growth at leading banks is likely to slow down in coming months following a series of interest rate increases by the central bank in Asia’s third-largest economy to tame stubbornly high inflation.
The central bank is seen raising rates by a quarter point on 3 May and analysts now expect it to raise rates by a total of 75 basis points for the rest of 2011, or 25 bps more than they expected in mid-March, a Reuters poll showed.
Headline inflation in India was at nearly 9% in March, far above forecasts, on higher fuel and manufacturing prices, adding pressure on the central bank to take bolder action despite eight rate rises since mid-March 2010.
Higher interest rates hurt demand for credit, especially for mortgage and automobile loans.
Bank loans in India rose 22% on the year as of 8 April, the central bank’s latest weekly statistical supplement data showed, slowing from an annual 24.4% rise as of 31 December last year.
ICICI shares, which the market values at nearly $29 billion, were trading down 0.3% at 1.30 p.m. in the Mumbai market that was trading 0.6% lower.
The New York-listed ICICI said its net profit in January-March, its fiscal fourth quarter, rose to Rs1,452 crore ($328 million) from Rs1,006 crore reported a year earlier.
The profit was hit by treasury loss of Rs196 crore compared to similar gains in the year ago period and increase in operating expenses to Rs1,789 crore from Rs1,458 crore.
Net interest income rose 23% to Rs2,510 crore.
A Reuters poll of analysts had forecast net profit of Rs1,489 crore on net interest income of Rs2,375 crore.
ICICI said its advances grew 19% to Rs2.16 trillion as of end-March. The bank’s net non-performing asset ratio dropped to 0.94% from 1.87% a year ago, signalling an improvement in asset quality.
Provisions for bad loans fell 61% to Rs384 crore, while fee income rose 18% to Rs1,791 crore.
India’s third-largest lender, HDFC Bank, last week exceeded estimates with a 33% rise in quarterly profit and said it expected credit demand to rise more than 20% in this fiscal year that started on 1 April.