Mumbai: India’s largest private lender ICICI Bank Ltd on Friday reported a 30% rise in net profit for the September quarter to Rs.1,956 crore, driven by a 34.5% increase in net interest income on a handsome 18% loan growth.
The profit was higher than Rs.1,869 crore estimate from a poll of analysts by Bloomberg. The bank’s earnings per share improved to Rs.16.91 from Rs.13 last year.
ICICI Bank’s stock fell 0.73% to close at Rs.1,078.25 on Friday on BSE Ltd, while the bourse’s benchmark Sensex fell 0.71% to close at 18,625.34 points and the banking index, the Bankex, shed 0.92% to close at 13,217.36 points. The bank announced its earnings during market hours.
The growth in advances was mainly driven by lending to companies, which rose more than 20% compared with a 14% growth in retail loans to individuals buying cars, commercial vehicles and homes.
ICICI Bank was able to maintain its asset quality in the September quarter. Gross non-performing assets (NPA) as a proportion of its loan book was 3.54% at the end of September, unchanged from June.
After provisions, net NPAs in September were 0.78%, lower than in the year-ago period but marginally higher than the June quarter’s net NPA of 0.71%.
ICICI Bank classified Rs.500 crore of loans to media company Deccan Chronicle Holdings Ltd as bad debt and set aside 85% of the amount to provide for this.
The bank’s net interest margin (NIM), or the difference between interest earned and interest expended, improved to 3% from 2.6% in September 2011, managing director and chief executive officer Chanda Kochhar said.
“The profit was driven by a rise in advances, improvement in NIM and because expenses were in control,” Kochhar said.
Non-interest income rose 17% to Rs.2,043 crore as the bank earned fees and received dividends from its insurance and mutual fund subsidiaries.
Kochhar said the bank earned fees from a varied set of businesses except project lending, which saw a slowdown.
ICICI Bank’s loan book is dominated by retail loans accounting for 34% of its advances, followed by corporate (29%) and international business (25%). Loans given to small and medium enterprises and agriculture account for the rest.
“We expect the corporate loan book to grow slightly faster than the retail loans for the rest of the year, driven by working capital loans. Overall, we expect a 20% growth in the loan book,” Kochhar said.
S. Ranganathan, head of research at LKP Securities Ltd, said ICICI Bank has cemented its place as the top pick among banks with these solid numbers.
“We are bullish on this bank because it has met all expectations. The challenges this bank faces is common to all others, which is to do with stress in the infrastructure sector and power and capital goods. ICICI Bank is well placed,” he said.
Kochhar said the bank will continue to monitor infrastructure projects. “Our slippages remain stable and broadly the asset quality is under control. There are issues to do with land and cash flows could be impacted, but we expect no negative surprises on provisions,” Kochhar said.
Rikesh Parikh, vice president, markets strategy and equities, Motilal Oswal Securities Ltd, expects ICICI Bank’s NIM to be maintained at around 3% as fund costs drop.
“With no deterioration in assets quality, (we) maintain ‘buy’. Top pick among private sector banks (with a) target price Rs.1,225 for one year perspective,” Parikh said in a note after the bank announced its earnings.
On a consolidated basis, ICICI Bank recorded a 20% increase in net profit to Rs.2,390 crore. ICICI Prudential Life Insurance Co. Ltd, the bank’s life insurance subsidiary, recorded a net profit of Rs.396 crore, up from Rs.350 crore last year. Its general insurance company recorded a Rs.101 crore net profit, up from Rs.56 crore last year.
ICICI Prudential Asset Management Co., the asset management arm, earned a Rs.23 crore net profit in the quarter, up from Rs.20 crore last year.