BackICICI Bank Q2 profit inches up 12% to Rs3,030 crore
ICICI Bank also says it sold 9% stake in its general insurance business to Fairfax Financial Holdings Ltd for about Rs1,550 crore
Premium
Mumbai: ICICI Bank Ltd, India’s largest private sector bank by assets, on Friday reported a Goldilocks quarter—not too hot and not too cold, in a reflection of the broader economy where the consumer sector continues to show some growth even as business sentiment remains weak.
In the case of ICICI Bank, this translated into strong growth in retail credit, which helped provide a buffer against weak credit demand from corporates. Asset quality remained steady but showed no significant improvement with the process of de-bottlenecking of stalled projects still under way.
For the September quarter, net profit at ICICI Bank rose 11.85% ₹ 3,030.11 crore, compared with ₹ 2,709 crore a year ago. A Bloomberg poll of 29 analysts had forecast a net profit of ₹ 2,998.6 crore for the quarter.
Net interest income (NII), or the core income a bank earns by giving loans, increased 12.77% to ₹ 5,251.48 crore from ₹ 4,656.6 crore last year. Net interest margin (NIM) improved to 3.52% in the September quarter compared with 3.42% in the same quarter last year.
During the quarter, the bank saw domestic advances grow 17%, but most of this growth came from retail advances, which grew 25% during the quarter. Corporate loan book grew just 7% and most of this was demand for working capital. Demand for long-term credit remains weak as the private investment cycle is yet to pick up.
“The retail credit growth for the banking system itself is at about 17-18%. A market leader like us would continuously gain market share as the industry grows. We have always said that we will grow over and above the industry growth rate," said Chanda Kochhar, managing director and chief executive officer of ICICI Bank, in a call with journalists after the earnings release.
Kochhar added that corporate credit growth may hit double digits by the end of the year. “Next year looks good for corporate credit," she said.
Other private sector peers have shown stronger growth in corporate credit this quarter.
HDFC Bank Ltd, which reported 28% loan growth during the quarter, saw retail credit growing by 29% and wholesale credit growing by 23%. At Axis Bank Ltd, corporate loans and retail loans grew 25%.
“That decision is clearly being led by the level of stressed assets on ICICI’s books as compared with other private lenders. Moreover, they would like to reduce their lumpy exposures to certain corporates," said a banking analyst with Reliance Securities, adding that corporate loan growth at ICICI Bank may remain lower than that of HDFC Bank or Axis Bank. He requested anonymity as he is not allowed to speak to the press.
Asset quality at the bank remained stable during the quarter with some reduction in the run-rate of restructured loans turning bad.
Gross non-performing assets (NPAs) for the quarter stood at 3.77% compared with 3.68% in the quarter ended 30 June.
During the quarter, the bank had gross NPA additions worth ₹ 2,242 crore, including slippages worth ₹ 931 crore arising from the standard restructured category, Kochhar said. Slippages in the June quarter stood at ₹ 1,672 crore.
The bank’s restructured asset base stood at ₹ 11,868 crore as on 30 September compared with the ₹ 12,604 crore at the end of the June quarter.
“About ₹ 2,000 crore worth of loans were refinanced under 5/25. But those are for companies that are viable and those that have taken shorter-term loans in the past whereas the lifeline of their assets justify that they could have longer term loans," Kochhar said.
Provisions and contingencies for the quarter rose 11% from a year ago to ₹ 942.16 crore. After provisioning, net NPAs were at 1.65% versus 1.58% in the June quarter.
The green shoots visible in the economy, such as revival of some gas-based power projects, improving demand for passenger and commercial vehicles, increasing mining activity and the tendency of promoters to reduce debt on their books is pointing towards an improvement in asset quality, Kochhar said.
“The work has to keep going on. We believe that the net additions (of bad loans) for us this year should be less than what it was last year," she said.
“Asset quality was in line with our expectations since the management has guided for more additions to stressed assets during the year... However, we would wait for more clarity on the stressed asset additions during the year," said Vaibhav Agrawal, vice-president, research, Angel Broking.
Total deposits at the end of the second quarter stood at ₹ 3.85 trillion, up 9% from a year ago. ICICI Bank’s current account-savings account ratio stood at 40.7% as on 30 September, up from 39.5% in the year-ago period. Other income increased to ₹ 3,007.35 crore from ₹ 2,738.4 crore in the year-ago period.
Separately, ICICI Bank said that its board has approved the sale of 9% stake in its general insurance subsidiary ICICI Lombard General Insurance Co. to Fairfax Financial Holdings for ₹ 1,550 crore. The proposed transaction values the company at ₹ 17,225 crore. The transaction is subject to government and regulatory approvals, ICICI Bank said in a statement.
The process to monetize holdings in the life insurance subsidiary are ongoing, said Kochhar.
“We have always said that we would like to monetize our subsidiaries but, as of now, we don’t have any IPO plans," she added when asked whether any of the insurance subsidiaries are planning a public listing.
Unlock a world of Benefits! From insightful newsletters to real-time stock tracking, breaking news and a personalized newsfeed – it's all here, just a click away! Login Now!
