ICICI Bank Q2 Results: Net Profit Rises Over Six Times Despite Higher Provisions

ICICI Bank Ltd.’s profit in the quarter ended September beat expectations, rising by over six times compared with the same period a year ago even as provisions rose.

The bank’s net profit stood at Rs 4,251 crore in the second quarter, according to an exchange filing. It had been pegged at Rs 2,868 crore according to the consensus estimate of analysts tracked by Bloomberg. This is the highest quarterly profit reported by the lender, according to Sandeep Batra, president, ICICI Bank.

The rise in net profit was aided by a 20% rise in operating profit at Rs 8,261 crore and a decline in tax expenses. The bank paid taxes worth Rs 1,104 crore in the second quarter, down from Rs 3,712 crore a year ago. ICICI Bank also gained Rs 305 crore by selling a 2% stake in ICICI Securities Ltd. during the quarter, it said.

Net interest income, or the core income of the bank rose 16% year-on-year to Rs 9,366 crore, in line wth the Rs 9,391 crore forecast.

Asset quality improved in the July-September quarter. Gross non-performing asset ratio stood at 5.17% against 5.46% as on June 30. Net NPA ratio, too, improved to 1% in the second quarter, down 23 basis points sequentially.

ICICI Bank said it followed instructions of the Supreme Court in the “Gajendra Sharma v/s Union of India” case and did not report certain accounts as NPA after Aug. 31. If the apex court order was not in place, the bank’s gross NPA and net NPA ratios as on Sept. 30 would have been higher at 5.36% and 1.12%, respectively.

Provisions Rise To Contend With Pandemic

Provisions in the July-September quarter rose to Rs 2,996 crore from Rs 2,507 crore a year ago. In the June quarter, the bank had made provisions worth Rs 7,594 crore.

According to Batra, provisions also included Rs 497 crore made towards accounts, which are covered under the Supreme Court’s instructions in the ongoing case. As on September 30, the total Covid-19 related provisions made by the bank stood at at Rs 8,772 crore.

“We now have a provision coverage ratio of over 80%, which is high,” said Batra in a conference call with reporters. “We will look at rationalising this number over the next year.”

The Reserve Bank of India, in a circular on August 6, had allowed a one-time restructuring by banks of loans to borrowers that had been impacted by the pandemic. According to Batra, ICICI Bank has received a restructuring request from one large corporate and a few retail borrowers.

“The pipeline of accounts seeking restructuring is small right now. But these are still early times. We believe that the additional provisions we have made this year will completely cushion the balance sheet against any credit losses,” Batra said.

On The Path To Recovery

Total advances as on September 30 stood at Rs 6.52 lakh crore, up 6% year-on-year. While the bank’s retail loan portfolio rose 13% from a year ago, the performing credit book rose 7%.

“We have seen a substantial increase in month-on-month retail loan disbursals since the lockdown restrictions were eased. The disbursals in mortgages have exceed pre-Covid levels and auto loans have reached pre-Covid levels now,” Batra said.

However, credit growth is not a priority for ICICI Bank at this stage. Rather, the bank is driving risk-calibrated operating profit as a target, he said.

ICICI Bank reported a 20% rise in outstanding deposits, which rose to Rs 8.33 lakh crore as on September 30. While the average savings account deposits rise 15% year-on-year, term deposits registered a growth of 26% to Rs 4.68 lakh crore.

The private sector lender’s board also sought to reappoint Sandeep Bakshi as MD & CEO till October 2023. The board said that it will be approaching the RBI for extending Bakshi’s term from October 15, 2021 to October 3, 2023. The board and its shareholders have already approved the extension.