Private sector lender ICICI Bank ‘s July-September quarter earnings matched analysts’ expectations on Friday with standalone profit rising 11.8 percent year-on-year to Rs 3,030 crore, aided by revenue, other income and operating profit.
The stock rallied 2 percent at close due to insurance stake sale news, ignoring asset quality concerns.
Net interest income (the difference between interest earned and interest expended) increased 12.8 percent year-on-year to Rs 5,252 crore during the quarter with net interest margin net interest margin at 3.52 percent (against 3.54 percent in preceding quarter and 3.42 percent in year-ago period).
NII was boosted by loan book, especially retail business. The year-on-year growth in domestic advances was 17 percent and 13 percent in total advances, the country’s largest private sector lender says, adding it continued to see robust growth in retail business resulting in a Y-o-Y growth of 25 percent in retail portfolio that constituted about 44 percent of loan portfolio.
Profit was estimated at Rs 3,009 crore and net interest income of Rs 5,273 crore for the quarter, according to analysts polled by CNBC-TV18.
Deposits increased by 9 percent on yearly basis and CASA deposits (current and saving accounts) were up 13 percent. It says CASA ratio was at 45.1 percent during the quarter compared to 44.1 percent in preceding quarter and 43.7 percent in year-ago period.
Other income (non-interest income) during the quarter climbed 9.8 percent to Rs 3,007.4 crore (including fee income of Rs 2,235 crore) and operating profit also jumped 9.8 percent to Rs 5,158.4 crore compared to year-ago period.
Asset quality weakened in quarter ended September 2015. Gross non-performing assets increased 65 basis points year-on-year (up 9 bps sequentially) to 3.77 percent and net NPA rose 56 bps on yearly basis (up 7 bps Q-o-Q) to 1.65 percent during the quarter, ICICI Bank says.
In absolute terms, gross NPAs for the quarter were at Rs 15,858 crore, an increase of 37.3 percent compared to year-ago period and 4.8 percent compared to preceding quarter. Net NPAs climbed 71.5 percent year-on-year and 6.7 percent quarter-on-quarter to Rs 6,759.3 crore in same period.
ICICI Bank says net loans to companies whose facilities have been restructured were Rs 11,868 crore at the end of September quarter, compared to Rs 12,604 crore in preceding quarter.
The bank witnessed fresh slippages at Rs 1,311 crore in three months period ended September 2015 (against Rs 1,380 crore in June quarter), excluding Rs 931 crore slippages from restructured book, says Chanda Kochhar, Managing Director and CEO (while addressing press conference post earnings).
She expects NPA addition this year (FY16) to be lower than the last year, adding restructured assets at Rs 2,000 crore under 5:25 scheme during the quarter.
The bank has not sold loans to asset reconstruction companies in Q2, Kochhar says.
Provision for bad loans declined 1.3 percent to Rs 942.2 crore during the quarter compared to Rs 955 crore in preceding quarter but on yearly basis that increased 11 percent. The bank says provision coverage ratio was 57.4 percent in September quarter.
Capital adequacy ratio (as per Basel III norms) declined during the quarter to 16.15 percent from 16.37 percent in June quarter and 16.64 percent in corresponding period of last fiscal.
Cost-to-income ratio was at 37.5 percent in September quarter compared to 36.5 percent in same quarter last fiscal.
Pankaj Sharma, Head – Equities of Equirus Securities says that, on the ground, not much has changed in the NPL situation. “I am not too hopeful of what could change on the non-performing assets (NPA) situation as such,” he said.
Nine or twelve months backs, private sector banks were priced expensively, he says adding that valuations are more “realistic” now.
Insurance stake sale
ICICI Bank says its board of directors today approved sale of 9 percent shareholding in insurance company ICICI Lombard General Insurance Company to Fairfax Financial Holdings, the joint venture partner. This transaction, which values its insurance company at Rs 17,225 crore (USD 2.6 billion), is subject to governmental and regulatory approvals.
Upon completion of transaction, share ownership in insurance company of ICICI Bank and Fairfax will be approximately 64 percent and 35 percent, respectively.
Kochhar says the bank sold 9 percent stake in ICICI Lombard for RFs 1,550 crore, adding there are no plans for IPO for insurance business as of now.
ICICI Prudential Life Insurance Company (ICICI Life) achieved a profit after tax of Rs 415 crore during the quarter compared to Rs 399 crore in same quarter last year.
The stock closed at Rs 277.15, up Rs 5.70, or 2.10 percent amid high volumes on the BSE.