ICICI Bank Profit Misses Estimates, Asset Quality Stable

ICICI Bank Ltd.'s net profit missed estimates for the December ended quarter even as asset quality remained stable.

Profit of India’s second-largest private bank fell 32.4 percent over a year ago to Rs 1,650 crore, it said in an exchange filing. That’s lower than the Rs 1,903 crore estimated by analysts tracked by Bloomberg. The bottom line declined on a higher base in the comparable quarter when an other income of Rs 900 crore from treasury operations and Rs 82 crore from exchange-rate gains had boost profit, Managing Director and Chief Executive Officer Chanda Kochhar in a conference call.

Core income of the bank, or the net interest income, rose 7.2 percent to Rs 5,705 crore year-on-year. That compares with the Rs 5,862 crore estimate. Net interest margin remained flat at 3.3 percent on a quarter-on-quarter basis.

Asset Quality Improves Marginally

Asset quality of the lender remained stable. Gross non-performing asset ratio declined marginally to 7.82 percent from 7.87 percent in the last quarter. Gross additions to bad loans stood at Rs 4,380 crore, the lowest in nine quarters. Net bad loan ratio also fell to 4.20 percent from Rs 4.43 percent on a sequential basis.

Provisions against bad loans declined to Rs 3,570 crore from Rs 4,503 crore in the same period. The private lender’s provisioning coverage ratio improved by 160 basis points to 60.9 percent. The bank said it has an exposure of Rs 10,061 crore to 18 accounts named in the Reserve Bank of India’s second list of stressed assets that may face insolvency proceedings. That represents 36.4 percent of the bank’s provision coverage.

Provisions are likely to remain elevated in the next quarter due to stressed accounts undergoing insolvency proceedings and ageing bad loans, Kochhar said. She expects recoveries to begin from first quarter of the next fiscal, most of which will come from the resolution of insolvency cases pending at the National Company Law Tribunal. “It’s apparent that there is good amount of interest for insolvency accounts. We should see some recovery there.”

Unlike rival HDFC Bank Ltd., ICICI Bank didn’t disclose any divergence between its results and the bad-loan audit conducted by the RBI. The regulator completed the exercise in the December quarter and ICICI Bank isn’t required to make any disclosures regarding it, Kochhar said in the conference call. According to rules, banks need to disclose any divergence of more than 15 percent.

Other Highlights

• Domestic loan growth at 16 percent, the highest in five quarters.
• Retail loans grew 22 percent; domestic corporate loan growth at 15 percent year-on-year.
• Deposit growth at 11.2 percent.
• Share of current and savings account deposits higher at 54.0 percent, up 90 basis points quarter-on-quarter.