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Informist, Thursday, Oct. 17, 2024

By Kshipra Petkar

MUMBAI – Higher loan growth is expected to help ICICI Bank report a rise in net profit in Jul-Sept, but the rate of growth may be capped by pressures from a moderation in net interest margins and a rise in provisions, analysts said. The net profit for the bank is seen rising nearly 7% on year to INR 109.77 billion for the quarter ended September, as per the average of estimates from 15 brokerage firms. Sequentially, the net profit is seen falling merely 0.7%. The net profit is seen in the range of INR 106.67-115.72 billion.

The net interest income of the private sector bank is seen rising 9.3% on year to INR 200.10 billion, as per the average of estimates from 15 brokerage firms. Sequentially, it is seen rising 2.3%. "NII (net interest income) growth will be slightly slower than average loan growth due to rise in cost of deposits outpacing yield on advances. Consequently, NIM (net interest margin) will be slightly lower sequentially," YES Securities said in its report.

Motilal Oswal in its report said that the management expects net interest margins to be range-bound with a slight downward bias in the near term amid elevated term deposit rates, while the repricing of the term deposits appears to be largely complete. Prabhudas Lilladher expects the margins to fall by 4 basis points on quarter due to a rise in cost of funds. In the previous quarter, the net interest margin moderated to 4.36% from 4.40% in Jan-Mar.

"The NIM compression cycle appears to be gradually behind, which is likely to be a key positive outcome," Kotak Institutional Equities said in its pre-earnings report.

Analysts expect asset quality of the bank to remain stable. The bank could see a fall in slippages on a sequential basis due to seasonality. As of Jun. 30, the gross NPA ratio was at 2.15% and the net NPA ratio at 0.43%. "We expect provisions growth to be higher as the base quarter had negligible provisions," Kotak Institutional Equities said. In the previous quarter, the bank's provisions were up only 3.1% on year at INR 13.32 billion.

The General Election and a heatwave across the country during the Apr-Jun quarter had led to stress in the agricultural loan portfolios of most banks. In Apr-Jun, the Kisan Credit Card loans led to a marginal rise in slippages. Emkay Global said that the stress in the Kisan Credit Card book may also fall in the reporting quarter. Kotak Institutional Equities estimates slippages worth INR 60 billion in the reporting quarter. In the previous quarter, the bank saw gross slippages of INR 59.16 billion, mainly from the retail, rural and business banking book.

On the business front, loan growth is expected in the range of 14-15% on year. "The growth is expected to be broad-based across all the segments," KR Choksey Research said in its pre-earnings report. As of Jun. 30, the total advances of the bank were up 15.7% on year to INR 12.23 trillion, with the retail loan book having the highest share at 54.4%. As per brokerage reports, deposits are expected to grow 14% on year. As of Jun. 30, total deposits were up 15.1% on year at INR 14.26 trillion.

At 1302 IST, shares of ICICI Bank traded 1.6% lower at INR 1,246.65 on the National Stock Exchange. The bank will announce its earnings on Saturday.

Following are the Jul-Sept earnings estimates for ICICI Bank based on estimates compiled by Informist from 15 brokerage firms: 

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Edited by Akul Nishant Akhoury

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