ICICI Bank stock shines in a dull market on good performance in Q3

The net advances grew by 18.5 per cent YoY and 3.9 per cent QoQ. Deposits stood at Rs 13.3 trillion, with CASA ratio at 39.4 per cent down 20 bps sequentially

ICICI Bank reported good results for the October-December 2023 quarter (Q3), with 24 per cent year-on-year (Y-o-Y) growth in profit after tax (PAT). Net interest margin (NIM) dropped 10 bps quarter-on-quarter (Q-o-Q) to 4.43 per cent. Credit growth was at 19 per cent Y-o-Y (4 per cent Q-o-Q), while deposit growth was at 19 per cent Y-o-Y (3 per cent Q-o-Q). The net interest income (NII) growth was 13.4 per cent Y-o-Y, while NIM contraction was mainly due to rising cost of funds.

There were slippages of Rs 617 crore from the Kisan Credit Card exposure. The gross non-performing assets (NPA) ratio decreased 18 bps Q-o-Q while net NPA remained flat at 0.44 per cent. The bank maintains a contingency buffer of Rs 13,100 crore (about 1.1 per cent of loans). Absolute gross NPAs decreased by 3.6 per cent sequentially due to upgrades and recoveries.Other income grew 21 per cent Y-o-Y to Rs 6,090 crore, led by core fees (up 19 per cent Y-o-Y), while treasury gains was just Rs 120 crore. The profit before tax (PBT) (excluding treasury) grew 23.4 per cent Y-o-Y to Rs 13,550 crore while PAT rose 23.6 per cent Y-o-Y to Rs 10,272 crore. The core pre-provision operating profit grew 10.3 per cent Y-o-Y.

Reported slippages (Rs 5,710 crore gross addition to gross NPA versus Rs 4,690 crore in Q2FY24) rose sequentially, but net NPA was steady while the provision coverage ratio or PCR (excluding technical write-offs) stood at 81 per cent. ICICI Bank did not include contingent and floating provision (Rs 23,200 crore) in PCR calculation. The contingent provision (excluding PCR) stood at 2.0 per cent of the loan book. The retail, rural, and business banking portfolio contributed Rs 5,482 crore to additional gross NPA. Net advances grew by 18.5 per cent Y-o-Y and 3.9 per cent Q-o-Q. Deposits stood at Rs 13.3 trillion, with current account savings account (CASA) ratio at 39.4 per cent down 20 bps sequentially. The provisions expenses rose sequentially to Rs 1,050 crore versus Rs 580 crore in Q2FY24.

Retail slippages increased by 24 per cent sequentially while corporate & SME slippages were down by 28 per cent Q-o-Q. The standard restructured book (0.29 per cent of portfolio) was down marginally to Rs 3,300 crore, with retail contributing 85 per cent of the restructured pool (over 95 per cent is secured). There are provisions of Rs 1,000 crore (about 31 per cent coverage) of the restructured pool.

The yield on advances declined 2 bps Q-o-Q to 9.79 per cent. There was also some negative impact due to derecognition of interest income on the Kisan Credit. The bank reiterated that FY24 (full year) margin would be similar to FY23. This implies a little more NIM compression in Q4FY24. Management claims net slippages in retail are expected to normalise upward.

Provisions at Rs 1,090 crore, were up 80 per cent Q-o-Q but down 53 per cent Y-o-Y, which is annualised credit cost of 37 bps. A new provision of Rs 627 crore was made towards applicable Alternate Investments Funds (AIF) Investments due to the new RBI regulations.

Advances grew 18.5 per cent Y-o-Y and 3.9 per cent Q-o-Q, led by 19 per cent Y-o-Y growth in domestic and 21 per cent Y-o-Y growth in retail loans. Among retail, housing led the growth. The unsecured loan mix has increased to 14 per cent of total loans. The SME book rose by 28 per cent Y-o-Y, while the “BB and Below” rated book grew 32 per cent Y-o-Y. According to Bloomberg, 38 of 40 analysts polled after results remain positive on the stock with ‘buy’, ‘add’, ‘outperform’ ratings and some upgrades to valuation targets. Their average target price is Rs 1,231.

On Tuesday, the stock hit a record high of Rs 1,067.40 on the BSE before closing 2 per cent higher at Rs 1,029.45. Even as leading indices fell by 1.5 per cent, bank indices were down by over 2 per cent.