ICICI Q2 net up; balance sheet set to grow again

ICICI Q2 net up; balance sheet set to grow again

Mumbai: ICICI Bank India’s No.2 lender, expects its loan book to grow after at least five quarters of contraction as its focus on corporate and mortgage loans gains from a rise in business confidence in Asia’s third largest economy.

The bank posted a small but surprise rise in quarterly profit on trading gain and lower costs that offset a rise in bad debts and analysts expected its loan growth to resume from this quarter.

The unexpected net profit rise sent its shares up as much as 4.9% on day. By 3:13pm, the shares were up 2.3% at Rs789.05.

Rising business confidence in Asia’s third-largest economy is expected to bring back corporate, housing, auto and retail demand helping Indian banks boost sagging loan growth.

“We have been a bit skeptical but I think the worst is behind. The bank is looking a lot healthier," said Deven Choksey, CEO of KR Choksey “The stock should get re-rated by 15 to 20%." He manages about $120 million in the firm’s wealth management arm.

ICICI has slowed lending as it tackles a jump in bad loans in its mainstay retail market.

“There will not be any balance sheet contraction as we are seeing growth in the segments we like," managing director Chanda Kochhar told reporters in a conference call.

The bank, which focused largely on the fast-growing retail market dominated by unsecured personal loans, consumer finance and credit cards, is shifting focus to the stable corporate, mortgage and auto sectors.

Kochhar expected the bank to post a single digit loan growth for the year ending March 2010, while analysts estimate it to be between 5-8%, still a far cry from a more than 30 percent surge over the past few years.

Analysts expect a full-fledged recovery in the year to March 2011, in line with a banking industry that is expanding its loan book at about 13%.

ICICI’s positive outlook comes amidst the world’s leading banks warning bad debts would continue to weigh and signs of recovery were not clear.

ICICI said its total loan book fell 3.6% to $39.7 billion in July-September from the June quarter.

Gross bad debts rose to 4.7% of advances from 4.2%, but Kochhar said going forward bad