ICICI Bank posts record Q2 profit, but bad loans rise

By Devidutta Tripathy

MUMBAI (Reuters) - ICICI Bank Ltd, India's biggest private sector lender, reported a record quarterly profit on Thursday that beat analyst estimates, but bad loans rose and sent its shares lower.

Net profit rose 15 percent to 27.09 billion rupees for its fiscal second quarter ended Sept. 30, the Mumbai-based lender said in a statement. Analysts on average had expected a net profit of 26.93 billion rupees for ICICI Bank, which is also listed in New York.

Indian lenders are betting on a revival in economic growth under a new government to boost demand for corporate lending after credit growth hit a decade low, hurt by two straight years of less than 5 percent economic expansion.

A Reuters poll of economists last week showed the economy is likely to grow 5.5 percent during the current fiscal year to March, and 6.4 percent the following year, as Prime Minister Narendra Modi implements reforms to attract investments.

Indian banks are expected to post a 16.4 percent growth in revenue and a 22 percent growth in net income over the next 12 months, according to Thomson Reuters SmartEstimates, which emphasises recent forecasts by top rated analysts, in what is the highest expected increase in the sector in Asia Pacific.

The optimism has made bank shares the best performers this year among peers in the Asia-Pacific region. However, high bad loans and huge capital requirements in the coming years has restrained the bullishness somewhat, although private sector lenders are seen better-placed than the dominant state-owned banks who account for more than two-thirds of assets.

ICICI's net non-performing loans as a percentage of total loans were 0.96 percent for the September quarter, compared with 0.87 percent in the previous quarter and 0.73 percent a year earlier.

Net interest income, the difference between interest earned and paid, grew 15 percent on year in the September quarter to 46.57 billion rupees. Net interest margin rose to 3.42 percent from 3.31 percent a year earlier.

Retail loans grew 25 percent annually, faster than a 14 percent growth in total credit demand for the bank.

ICICI Bank shares were off half a percent at 1,598 rupees in Thursday afternoon trade, against a 0.8 percent rise in the broader market.

Smaller private sector lender Yes Bank Ltd and state-run Andhra Bank also reported net profit ahead of analyst estimates, sending their shares higher.

State-run Indian Overseas Bank posted a net loss of 2.46 billion rupees and a jump in bad loans, sending its shares down more than 6 percent.

Allahabad Bank, another state-run lender, reported its net profit almost halved.

(Additional reporting by Tripti Kalro and Shilpa Murthy in Bangalore; Editing by Muralikumar Anantharaman)