ICICI Bank Results
ICICI Bank, the second-biggest private sector lender, posted a strong performance for the quarter ended March, beating Dalal Street projections by 9% to Rs 7,019 crore. Profit increased by 59 percent year over year, owing to strong net interest income (NII) growth, robust fee revenue, and a substantial drop in provisions.
The NII for the reporting quarter was greater than expected, increasing by 21% year on year to Rs 12,605 crore. It was helped by a four-basis-point increase in net interest margin to 4% and solid loan growth.
NIM improved due to strong traction in deposits and advances
The loan book increased by 17.1% year on year and 5.5 percent quarter on quarter to Rs 8.6 trillion. Retail loans, which climbed 18 percent, were the fastest-growing segment. Domestic loans increased by 17 percent year over year, while overseas loans increased by 1.5 percent. A total of 4.8 percent of the loan portfolio was made up of international loans.
The bank’s deposits increased by 14.2% year over year and 4.6 percent sequentially to Rs 10.6 trillion in the third quarter. CASA deposits increased by over 20% year over year and 8% quarter over quarter, while term deposits increased by 9% year over year and 2% sequentially. CASA mix increased by 150 basis points from the previous quarter to 48.7%.
SME loans increased by 34% year over year and 11.3 percent sequentially, accounting for 4.7 percent of the entire loan portfolio, while corporate loans increased by 8.9% year over year and 3.4 percent quarter over quarter. This demonstrates the bank’s continued emphasis on profitable expansion, as its NIMs have increased 16 basis points year over year and four basis points sequentially to 4%, with domestic NIM at an all-time high of 4.1 percent.
Loans in the retail industry increased 18% year over year and 6% sequentially. Within retail, house and personal loans grew by 5.3 percent and 10.4 percent, respectively. Business banking grew by 43% year over year and 10% quarter over quarter. During the quarter, credit cards had a double-digit sequential increase of 10%, while vehicle loans improved by 3%.
The contingent cover is strong, even as NPAs shrink
Because of lower slippages and better recoveries, the bank was able to strengthen its asset quality. In the March 2022 quarter, gross non performing assets fell to 3.6 percent, down from 4.1 percent in the previous quarter. In the December quarter, net NPA fell to 0.76 percent, down from 0.85 percent in the previous quarter. The pool of BB and lower-rated loans also shrank, and the restructuring book shrank to one percent of total loans.
Gross slippages were somewhat higher than predicted at Rs 4,200 crore, but recoveries were just as robust at Rs 4,700 crore, resulting in net negative slippages and the elimination of the requirement for special reserves. The bank, on the other hand, has provisions of 31%, which is greater than the regulation threshold.
Brokerage Views on ICICI Bank
“The bank is burning on all cylinders with a consistent combination of a high-yielding portfolio and a low-cost liabilities franchise, which is fueling sustained NII growth,” a brokerage company stated in its research. It expects the bank to continue to witness solid recovery in business trends across key categories such as retail, SME, and BB, while slippage management will assist lower financing costs even more.
Because of its emphasis on profitable expansion, ICICI has surpassed rivals in terms of core profitability. “Based on solid credit growth, higher margins, and smaller loss provisions, we boost FY22-24 RoE to 16-17 percent,” Emkay Research stated. It anticipates one-time benefits from the prospective sale of an ICICI Lombard share to fulfill regulatory requirements as bolstering RoEs even further.
ICICI Bank Outlook
Over the last several quarters, the bank has consistently excelled, with earnings quality rising each quarter. In FY24, various brokerage companies expect an RoE of 15.6 percent, compared to 16.8 percent for HDFC Bank.
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