 "ICICI Bank registers 15% growth in net profit")
This was slightly higher than the Bloomberg consensus estimate of Rs 2,685.6 crore.
The rise in profit was aided by 26 per cent growth in non-interest income to Rs 2,738 crore and expansion of net interest margins (NIM) on the back of 25 per cent year-on-year growth in retail advances and 15 per cent growth in current and savings account deposit.
However, the one big concern seen in the second quarter results was the increase in bad loans and provisions.
Provisions increased to Rs 825 crore during the quarter as compared to Rs 726 crore in the preceding quarter on the back of higher non-performing assets, which grew to Rs 3,997 crore from Rs 3,474 crore during Q1. Of the total provisioning, Rs 30 crore was provided towards unhedged foreign currency exposure, while Rs 100 crore was toward standard advances. The remaining provisioning was made towards bad loans.
Net NPA (non-performing asset) loans as a percentage of total loans also inched up to 0.96 per cent at the end of the second quarter compared to 0.73 per cent at the end of the same period last year.
However, restructuring advances portfolio saw a marginal decline, which stood at Rs 11,020 crore at the end of September. The bank sold loans worth Rs 290 crore to asset reconstruction companies.
“The operating environment continues to be challenging and as a result there has been an increase in the NPAs and the restructured assets. The slowdown has been prolonged and so there have also been slippages from the restructured assets into NPAs. The restructured assets were down this quarter partly because of upgradation and partly on account of slippages,” said Chanda Kochhar, managing director & CEO, ICICI Bank
During the quarter, Rs 800 crore of loans had slipped to NPAs. “This year we will continue to see fresh additions to NPAs but it would be lower than what was in the last financial year,” said Kochhar, adding that the restructuring pipeline is about Rs 1,800 crore.
Rajiv Mehta analyst at IIFL said that the results were in line with expectations. “Gross NPAs have gone up but the new additions to NPAs are still in line with what was in the previous quarter. And therefore, it is not a very big concern.”
Net interest income — the difference between interest earned and interest expended — grew by 15 per cent to Rs 4,657 crore helped by an overall credit growth of 14 per cent. Deposits growth was in line with the industry which was 14 per cent. The share of low-cost deposits in total deposits improved to 43.7 per cent as on September 30 as compared to 43 per cent in June-end.
The healthy growth in low-cost deposits helped the lender improve its net interest margin to 3.42 per cent in Q2 of 2015 compared to 3.31 per cent in Q2-2014. The management guided that going ahead the margin would continue to be in the range of 3.30-3.40 per cent.
Commenting on the credit expansion in the retail segment, Kochhar said the growth in the retail portfolio had mainly come from home and auto loans. The retail book now consists 40 per cent of the total loan book.
Kochhar added that going ahead the interest rate could see some moderation. “The inflation rate has softened and the crude oil prices has also cooled and this can give some headroom around the policy but we will have to wait and see.”
The ICICI Bank stock, which was trading lower after the results were announced, bounced back to close the day at Rs 1,611.50, up 0.47 per cent from its previous close, on the BSE.
FAIR WEATHER
- Rs 2,709 cr Net profit for Q2 of FY15
- 15% Y-o-y increase in net profit
- 25% Y-o-y growth in retail advances
- Rs 825 cr Provisions during the quarter