Q1 Results: ICICI Bank Profit Meets Estimates; Asset Quality Improves
ICICI Bank Ltd.’s first-quarter profit met estimates as its asset quality improved and provisions fell.
The private lender reported a net profit of Rs 1,908 crore in April-June, according to an exchange filing. That’s in line with Rs 1,976-crore consensus estimate of analysts tracked by Bloomberg. The bank posted a loss of Rs 119.6 crore a year earlier as it then chose to set aside more money to cover for bad loans.
Net interest income, or the core income of the bank, rose 27 percent year-on-year to Rs 7,737.4 crore in the quarter ended June—matching the Rs 7,480-crore estimate. The net interest margin stood at 3.61 percent compared with 3.72 percent in previous quarter.
ICICI Bank’s gross non-performing assets ratio fell to 6.49 percent from 6.7 percent in the previous quarter. Net bad loans contracted to 1.77 percent sequentially from 2.06 percent. Provisions also fell to Rs 3,495.7 crore sequentially from Rs 5,451 crore.
New non-performing assets formation for the bank should ease substantially this financial year on account of a shrinkage in BB and below-rated exposures, according to Bloomberg Intelligence report prior to the earnings release. Such exposures stood at Rs 15,355 crore at the end of first quarter compared with Rs 24,629 crore a year earlier.
- Domestic loan growth at 18 percent year-on-year, driven by retail portfolio.
- Retail loans, comprising 48.5 percent of the portfolio, grew 22 percent.
- Share of current and savings account deposits stood at 43.4 percent.
- Term deposits grew 34 percent.
- Provision coverage ratio at 83.4 percent.
The lender’s provision coverage ratio has touched its highest level in recent years, Siddarth Purohit, analyst at SMC Institutional Equities, told BloombergQuint. The earnings, he said, were broadly in line with street expectations.
Shares of ICICI Bank closed 1.7 percent higher on Friday compared with a 0.3 percent gain in Nifty 50. The shares have advanced 42 percent in the past 12 months.
Conference Call Highlights
- Corporate and small business slippages came from BB and below rated.
- Unsecured retail loans at 8 percent of total loans. Incremental business will be with existing customers.
- Targets 15 percent consolidated return on equity by June 2020.
- Has small exposure to some stressed names.
- No guidance for loan growth, aiming for profitable market share.
- No plans to raise capital as of now.