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ICICI Bank profit up 30% at Rs1,333 crore

ICICI Bank profit up 30% at Rs1,333 crore
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First Published: Sat, Jul 30 2011. 01 14 AM IST
Updated: Sat, Jul 30 2011. 01 14 AM IST
Mumbai: ICICI Bank Ltd, India’s largest private sector lender, posted a 30% growth in net profit to Rs1,333.3 crore for the quarter ended 30 June on higher interest income and a fall in provisions as non-performing loans dropped.
“Net interest income increased 21% to Rs2,411 crore versus Rs1,991 crore last year. Provisions decreased 43% to Rs454 crore from Rs798 crore in the first quarter of fiscal 2011,” the bank said in a release to BSE on Friday.
The net profit figure was slightly lower than Bloomberg’s estimate of Rs1,376.28 crore.
Net non-performing loans decreased to Rs2,351 crore, or 0.91% of assets, from Rs3,514 crore, or 1.62% of assets, last year.
Earnings per share improved to Rs11.51 from Rs9.16 in the same quarter last year.
Managing director and chief executive officer Chanda Kochhar said besides interest income and a reduction in provisions, an increase in net interest margin (NIM) also helped the bank. NIM is the difference between interest earned and interest expended, and is considered a key measure of a bank’s profitability.
“NIM improved 10 basis points (bps) to 2.6% from 2.5% last year, and is one of the reasons for the quality of our earnings. We expect to maintain margins going forward,” Kochhar said. A basis point is one-hundredth of a percentage point.
ICICI Bank will have to improve its overseas margins from 0.8% currently to maintain its margins for the rest of the year, said Laxmi Ahuja, an analyst at Marwadi Shares and Finance Ltd. “They have done well so far this year and they aim to increase margins from overseas business to 1.2% by March. But their investments in the Rural Infrastructure Development Fund (RIDF) has also had an 8-10 bps impact on margins,” she said.
Under RIDF, banks park funds with the National Bank for Agriculture and Rural Development to meet priority sector requirements, for which they get only 3-4% interest compared with much higher returns from loans to companies and individuals.
Under Reserve Bank of India (RBI) norms, banks have to lend a certain proportion of funds to the so-called priority sector—agriculture, small companies and weaker sections of society.
Kochhar said the bank is confident of achieving RBI’s 18% target for credit growth.
“We have seen demand from domestic corporate, SME (small and medium enterprises) and also retail sectors, and are confident of achieving the credit target with a 20% growth in deposits,” she said.
Kochhar, however, admitted that the retail book “is not shaping up well”. ICICI Bank’s retail book made a loss of Rs84.14 crore in April-June 2011, though that’s lower than the Rs217.33 crore loss in the same period last year.
“The loss in the retail book has come down, and unsecured consumer loans make up just 2.1% of total advances, down from 3% last year. We are giving these loans on a selective basis only to customers who have a long-term relationship with us,” she said.
A.S.V. Krishnan, an analyst at Ambit Capital Pvt. Ltd, said profit was 6% lower than his firm’s expectation of Rs1,400 crore. “But it’s still a good set of numbers, not disastrous. Credit growth, however, will come down to 16.5-17% for the bank, lower than the system growth of 18%, because loan demand is likely to slow and the bank, having learnt its lessons from the last cycle, will not want to grow aggressively this time,” he said.
ICICI rose 1.99% to Rs1,037.75 on BSE on Friday. The benchmark Sensex ended 0.07% lower.
The bank has to explain the drop in fee income, said Nilanjan Karfa, who tracks the bank at Brics Securities Ltd. “I am cautious on the bank. They have to maintain margins or else there could be a sell-off. ICICI has to now devise ways to get the most out of its branches,” he said.
ICICI Bank’s fees from selling mutual funds, insurance and advisory dropped 2.23% to Rs1,642.89 crore from Rs1,680.51 crore last year.
Kochhar said ICICI Bank is also contemplating increases in both deposit and loan rates after the latest hike by RBI.
joel.r@livemint.com
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First Published: Sat, Jul 30 2011. 01 14 AM IST
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