Mumbai: ICICI Bank met expectations with a 17% rise in quarterly net profit, and forecast 15% credit growth in the year to March 2011 as loan demand from corporate and mortgage borrowers remain strong.
Indian banks such as ICICI, India’s No. 2 lender, and top lender State Bank of India, are seeing an improvement in asset quality as consumer loan defaults slow in an economy forecast to grow about 8.5% in this fiscal year.
“On the balance sheet side, the growth has started. We are seeing growth on our loans and advances,” chief executive Chanda Kochhar told reporters. “The loan growth is going to come from both retail and corporate.”
Bank credit in India grew an annual 21.7% in early July, according to Reserve Bank of India (RBI) data, in tune with a rise in business and consumer confidence, from a low of 9.7% last October and compared with 16.7% at end-March.
The central bank sees non-food credit growth at 20% in 2010-11, still a far cry from growth rates of above 30% in the pre-crisis period.
Kochhar said that ICICI expected 20% domestic credit growth in this fiscal year, in line with the central bank’s forecast, and including the international book the overall loan growth would be about 15%.
“The growth in the international book will be slower than the growth in the domestic book. That is how the economy is shaping up,” she said.
A hike in lending rates by ICICI Bank was “quite possible” after the recent monetary tightening by India’s central bank, Kochhar said, but declined to comment on how soon the private sector lender would revise the rates.
The bank has raised rates on deposits by 25-75 basis points, depending upon the tenure, effective from Saturday, she said.
The RBI raised rates more than expected on Tuesday to fight inflation that is on track to hit double digits for a sixth straight month, setting the stage for more policy tightening.
A sharp rise in interest rates could derail demand for loans, especially from mortgage borrowers, analysts say.
ICICI said its net profit in April-June rose to Rs1,026 crore ($221 million) from Rs878 crore a year ago. Net interest income, the difference between interest earned and interest paid, rose by 0.3% to Rs1,991 crore.
A Reuters poll of analysts had forecast net profit of Rs1,030 crore on net interest income of Rs2,024 crore.
The loan book rose nearly 2% from the March quarter to Rs1.84 trillion at the end of June.
Its net interest margin, a key measure of profitability, was at 2.5% at end-June from 2.4% a year ago, and Kochhar said the bank expected to hold on to margins at this level for the rest of the year.
The net bad loans ratio dropped to 1.62% at end-June from 2.19% a year ago. The bank’s fee income rose 7% to Rs1,413 crore in the June quarter.
HDFC Bank, India’s second-largest private sector lender, earlier this month reported its strongest profit growth in more than a year.
Shares in ICICI Bank, valued at nearly $22 billion, have risen 3% this year, roughly in line with a 2% gain in the main Mumbai market but underperforming a 15% jump in the sector index.