Private sector lender ICICI Bank on Saturday reported a net profit of Rs 1,908.03 crore for the April-June quarter (Q1FY20), aided by good interest income and lower provisioning, against a loss of Rs 120 crore in the year-ago quarter. Analysts were expecting a profit of little more than Rs 2,000 crore for the first quarter.
The bank, however, showed improvement in asset quality, as its gross non-performing assets (NPA) ratio fell -- both year-on-year and sequentially -- and the gross additions to NPAs were lower than the year-ago quarter.
The gross NPA ratio was 6.49 per cent for the June quarter, compared to 8.81 per cent in the year-ago period and 6.70 per cent in the March quarter.
The net NPA ratio decreased to 1.77 per cent at the end of June 30 this year, which is the “lowest in 14 quarters”, said the bank’s executive director, Sandeep Batra, in a conference call with the media. In the year-ago quarter, the net NPA ratio was 4.19 per cent.
The bank’s management did not offer any guidance on slippages, or even credit and deposit growth, but said rather than chasing a growth target, the bank would be focusing on choosing customers that pass through their “filters”.
“As of now, we are stable (in terms of asset quality). We have our risk filters which are pretty tight. We continue to recalibrate the segments that we are not comfortable with. Whatever we are writing, we are quite comfortable with that,” said Batra.
“We are not targeting a number, but as long as the customer passes the risk filter, we are happy to grow our loan book,” said Rakesh Jha, group CFO.
“We do expect a credit cost within tolerable level and our overall outlook on credit cost is stable. We continue to monitor these credit qualities across our portfolios,” Jha said.
The bank’s net interest income (NII) increased by 27 per cent year-on-year to Rs 7,737 crore in the first quarter. NII in the current quarter includes Rs 184 crore of interest on income-tax refund, compared to Rs 8 crore in the year-ago quarter, and Rs 414 crore in the March quarter, the bank said in a statement.
Core operating profit (profit before provisions and tax, excluding treasury income) increased by 21 per cent year-on-year to Rs 6,110 crore from Rs 5,042 crore a year ago.
Net interest margin, or the difference between the yields on advances and cost of deposits, was 3.61 per cent compared to 3.19 per cent in the year-ago quarter and 3.72 per cent in the March quarter. Non-interest income, excluding treasury income, was Rs 3,247 crore compared to Rs 3,085 crore in Q1FY19. Also, fee income grew 10 per cent to Rs 3,039 crore.
“Retail fees constituted 72 per cent of total fees,” the bank said. Treasury income in the quarter was Rs 179 crore compared to Rs 766 crore in the year-ago period. However, last year’s treasury income included a gain of Rs 1,110 crore on sale of shareholding in ICICI Prudential Life Insurance.
Provisions for the quarter were Rs 3,496 crore compared to Rs 5,971 crore in the year-ago period.
The bank’s domestic loan book grew 18 per cent year-on-year, while total loan growth was 15 per cent. The CASA ratio was 45.2 per cent as of June 30, 2019, compared to 49.6 per cent on March 31, 2019, and 50.5 per cent on June 30, 2018.
Recoveries and upgrades of non-performing loans were Rs 931 crore in the first quarter. “At June 30, 2019, the fund-based and non-fund based outstanding to borrowers rated BB and below (excluding nonperforming assets) was Rs 15,355 crore ($2.2 billion) compared to Rs 24,629 crore ($3.6 billion) at June 30, 2018,” the bank said. These BB rated loans don’t necessarily mean they are due to slip into NPAs, the management clarified. “It doesn’t mean that the entire book will slip into NPA. Any bank, at any point, will have BB assets,” said Batra.
According to the management, the share of unsecured credit loans in the total loans is 8 per cent, and the BB-rated loans constitute 3.5 per cent of the total loans.
On a consolidated basis, profit after tax was Rs 2,514 crore in the first quarter, against Rs 1,170 crore in the fourth quarter and Rs 5 crore in the year-ago quarter. The bank said it was not planning to raise any capital, and that it was well capitalised.
The bank said it would continue to lend to good quality. The bank did not buy much securitised assets from NBFCs in the June quarter, and will buy those assets only if the retail loans pass the bank’s set ‘criteria’.
The bank sold about Rs 200 crore of loans to asset reconstruction companies on a cash basis in the quarter, the management said.