ICICI Bank surprised the market by posting a net profit of Rs 2,250 crore for December 2012 quarter as against Street expectations of Rs 2,080 crore, aided by higher fee income, better margins, lower provisioning and strong performance from corporate banking division, all of which indicate a healthy performance in core business.
A 30% jump in net profit over previous year was a result of similar growth in net interest income during the year. Though retail loans growth at 17% is lower than corporate loan growth of 20%, it is an improvement over 14% growth in September 2012 quarter. The bank hopes the retail growth will be better going forward.
Contribution (at profit before tax level) of retail business thus dropped from Rs 320 crore in December 2011 and Rs 300 crore in September 2012 to Rs 242 crore in December 2012. Contribution from corporate business during the same period was Rs 1,657 crore, Rs 1,488 crore and Rs 1,923 crore. This helped fee income grow 17% year-on-year and 8% sequentially to Rs 2,215 crore.
The profits also got a boost from treasuries, which improved from Rs 398 crore in December 2011 to Rs 934 crore in December 2012 (Rs 828 crore in September quarter).
But, importantly, ICICI Bank has performed well on various profitability parameters. Its Return on Assets has increased to 1.80% from 1.57% a year back while its capital adequacy ratio has increased to 19.53% from 18.88% in the previous year, indicating sufficient fuel to fund future growth. Net interest margin (NIM) too increased by 37 basis points to 3.07% over the year as cost to income ratio fell to 39.5% from 41.5% a year back. And the bank was able to keep its cost of funds low by maintaining its CASA at 40.9% of total deposits.
Net non-performing assets (NPA) have come down to 0.76% as compared to 0.83% in the year ago period, which is noteworthy given that slippages have added Rs 850 crore to the NPAs. While Rs 350 crore of loans were added to restructured portfolio in the quarter, the bank was also able to upgrade nearly Rs 650 crore of loans to standard assets. Approving asset quality meant lower provisions, which fell to Rs 369 crore as compared to Rs 508 crore in the previous quarter.
All this along with better performance of its subsidiaries helped the bank improve its consolidated return on equity, a key profitability parameter tracked by analysts, to over 15%. ICICI Bank’s management expects to continue its strong performance by posting a 20% growth in advances, with retail loan growth catching up with corporate loan growth of 20% and improvement in its margins further.