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Informist, Saturday, Jul 27, 2024

 

By Richard Fargose

 

MUMBAI – ICICI Bank's Apr-Jun net profit rose 14.6% on year due to steady loan growth and a sharp rise in other income. The private sector bank reported net profit of 110.59 bln rupees, higher than analysts' expectations of 106.04 bln rupees. Sequentially, the bank's bottomline was up 3.3%.

 

Other income of the bank rose 28.8% on year and 24.0% on quarter to 70.02 bln rupees in Apr-Jun. Non-interest income, excluding treasury, increased by 23.3% on year to 63.89 bln rupees. Within non-interest income, fee income grew 13.4% on year to 54.90 bln rupees. Fees from retail, rural, business banking and small and medium enterprise customers constituted about 78% of total fees during the quarter under review.

 

The private sector bank's treasury gains increased to 6.13 bln rupees in Apr-Jun from 2.52 bln rupees in the corresponding quarter a year ago, reflecting realised and mark-to-market gains in equity shares and security receipts, the bank said.

 

In the post-earnings media call, Executive Director Sandeep Batra said other income rose also due to a surge in dividend income from subsidiaries. In Apr-Jun, the bank's income from dividends rose to 8.94 bln rupees from 2.91 bln rupees in the corresponding quarter a year ago.

 

The bank's total advances increased by 15.7% on year and 3.3% sequentially to 12.23 trln rupees as on Jun 30. 

 

Domestic loan portfolio grew by 15.9% to 11.89 trln rupees as on Jun 30. The small and medium enterprise business, comprising borrowers with a turnover of less than 2.50 bln rupees, grew 23.5% on year, while the rural portfolio grew 16.9%, and the domestic corporate portfolio grew 10.3% on year.

 

The bank's credit cards portfolio grew 31.3% on year to 534.72 bln rupees, and personal loans rose 24.9% to 1.18 trln rupees as on Jun 30.

 

Total deposits increased by 15.1% on year and 0.9% sequentially to 14.26 trln at Jun 30. Term deposits increased by 19.9% on year and 3.1% sequentially to 8.42 trln rupees as on Jun 30. Average current account deposits during Apr-Jun increased by 13.3% on year and 3.1% sequentially, and average savings account deposits increased by 8.2% on year and 6.0% sequentially.

 

However, the net interest income growth lagged the loan growth and deposit growth due to further moderation in the net interest margin. Net interest income increased by 7.3% on year to 195.53 bln rupees in Apr-Jun. The net interest margin was 4.36% in Apr-Jun compared to 4.40% in Jan-Mar and 4.78% in the corresponding quarter a year ago.

 

The core operating profit of the second-largest private bank grew by 11.0% on year to 154.12 bln rupees in Apr-Jun.

 

ASSET QUALITY

The bank's asset quality remained steady in Apr-Jun, with the gross non-performing asset ratio at 2.15% as on Jun 30 compared to 2.16% a quarter ago. The net bad loan ratio was 0.43% compared to 0.42% as on Mar 31.

 

The gross non-performing asset additions were 59.16 bln rupees in Apr-Jun compared to 51.39 bln rupees in the previous quarter. While, recoveries and upgrades of non-performing assets, excluding write-offs and sale, were 32.92 bln rupees in Apr-Jun, compared to 39.18 bln rupees in Jan-Mar.

 

Batra said recoveries were down in Apr-Jun due to seasonal factors, while Kisan Credit Card loans led to a marginal rise in slippages. The General Election and a heatwave across the country during the Apr-Jun quarter led to stress in the agricultural loan portfolios of most banks. Batra also said that the bank sold non-performing assets worth 1.14 bln rupees in Apr-Jun. 
 

During the reporting quarter, the bank wrote off gross non-performing assets amounting to 17.53 bln rupees. The provisioning coverage ratio on bad loans was 79.7% as on Jun 30.

 

During Apr-Jun, provisions and contingencies rose only 3.1% on year to 13.32 bln rupees. The bank continues to hold contingency provisions of 131 bln rupees. The loan and non-fund based outstanding to performing corporate and SME borrowers rated "BB" and below was 52.86 bln rupees as on Jun 30, compared to 55.28 bln rupees a quarter ago. 

 

LCR NORMS

Batra said right now it is very difficult to assess the impact of the proposed new norms on the management of liquidity coverage ratio. "Yes, it will have an impact on deposit cost, loan growth, lending rates and investment yields etc. in dynamic situations," Batra said. "But, I think it's very difficult to assess the impact right now, and we will revisit the plans once the final guidelines come into place.'

 

For Apr-Jun, the bank's average liquidity coverage ratio was 123%.

 

On Thursday, the Reserve Bank of India released draft guidelines on the Basel-III Framework on Liquidity Standards – Liquidity Coverage Ratio. It proposes that banks should assign an additional 5% run-off factor on retail deposits opened by customers, who have internet and mobile banking facilities enabled, and tighten other norms on valuation of high-quality liquid assets as well as bring other sources of banks' liabilities under the liquidity coverage ratio framework.

 

Batra said the concerns for the RBI essentially emanate from the possibility of deposit outflows in a digital banking environment. He further said that there has been an increase in outflow components of both, for stable and less-stable deposits, due to digital banking. In March 2023, US-based Silicon Valley Bank faced severe liquidity issues after several of its depositors withdrew their funds, which resulted in the collapse of the bank.

 

On Friday, shares of ICICI Bank ended 0.8% higher at 1,207.20 rupees on the National Stock Exchange.  End

 

Edited by Aditya Sakorkar

 

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