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Business News/ Companies / Company-results/  Rise in retail loans aids ICICI Bank profit in June quarter
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Rise in retail loans aids ICICI Bank profit in June quarter

Net profit up 17% to `2,655 crore; corporate demand revival still some quarters away, says CEO

Net interest income (NII), or money earned from the bank’s lending business, increased 18% to Rs4,492 crore from Rs3,820 crore in the same period last year. Photo: Bloomberg Premium
Net interest income (NII), or money earned from the bank’s lending business, increased 18% to Rs4,492 crore from Rs3,820 crore in the same period last year. Photo: Bloomberg

Mumbai: ICICI Bank Ltd, India’s biggest lender outside government control, said net profit rose 17% as individuals continued to borrow for buying homes, cars and for personal consumption.

Net profit rose to 2,655 crore in the three months ended 30 June from 2,274 crore a year ago and higher than the 2,593 crore estimated by a Bloomberg survey of 35 analysts.

Managing director and chief executive officer Chanda Kochhar said on Thursday the bank “continued to adopt a calibrated approach" to corporate lending as revival in that business is still a “couple of quarters away".

Net interest income, or money earned from the bank’s lending business, increased 18% to 4,492 crore from 3,820 crore in the same period last year.

Its loan book increased 15% to 3.47 trillion from 3.01 trillion a year earlier, riding on a 26% growth in retail loans, the bank said. Within retail loans, auto loans grew a robust 46% while home loans increased 25% versus last year.

ICICI Bank’s earnings are in contrast to its close rival HDFC Bank Ltd, which had announced a 21% increase in net profit on 21 July driven by higher demand for loans from companies.

“The bank has continued with its strategy of pursuing profitable growth," ICICI Bank said in a statement. “The bank continued to grow its retail franchise and has seen healthy growth in retail assets and deposits."

Income earned from fees, commissions and trading increased 15% to 2,850 crore from 2,484 crore in the year-earlier quarter, including 416 crore earned as dividend from subsidiaries and 388 crore of treasury income.

Kochhar said that though the economy has shown signs of recovery through higher car sales and a positive industrial production index, demand for loans from companies will only come “with a lag".

“Growth in retail loans will continue to be in the excess of 20% for the rest of the year, loans to companies will start from working capital requirements and then move to capital expenditure," Kochhar said.

ICICI Bank’s domestic corporate loan book increased just 8%, in line with the bank’s overseas dollar denominated book. Forty per cent of the bank’s total loan book are borrowings by individuals while domestic corporate book makes up 30% of the bank’s loans.

For a bank of ICICI’s size, a 15% loan growth was commendable, said Sachin Shah, fund manager at Emkay Investment Managers Ltd.

“It is a very good performance considering that the banking sector growth is 13% to 14% and they have a large balance sheet. The fact that they maintained their net interest margin (NIM) makes these results better," Shah said.

NIM is a measure of a bank’s lending profitability. ICICI Bank’s NIM widened to 3.4% in June 2014 from 3.27% in June 2013. Kochhar said the bank expects to maintain its NIM at 3.3-3.4% for the rest of the year.

In a note on the bank ahead of its earnings report on Wednesday, Morningstar equity analyst Suruchi Jain said she is keeping a close eye on ICICI Bank’s fee income as a key driver to its profitability.

“We are raising our fair value estimate for ICICI Bank by 8% to 1,359 per share, ICICI’s general insurance business recorded its first accounting profit in fiscal 2013, since it began in year 2000, and in fiscal 2014 profits have nearly doubled. This is a key attraction of the insurance business—once it reaches scale the operating leverage that the business enjoys is enormous," Jain said in a note dated 30 July.

ICICI Bank’s net bad loans at 0.87% of net advances were up from 0.82% in March and 0.69% of net advances in June 2013. The bank’s stock fell 1.11% to 1,473 on BSE, while the benchmark Sensex fell 0.74% to 25,894.97 points.

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Published: 31 Jul 2014, 02:27 PM IST
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