ICICI Bank Q2 net falls over 50% to Rs 9 bn; net interest income rises 11%

Net interest income rose 11% to Rs 64.18 billion in September 2018 against Rs 57.09 billion in the year-ago quarter

Private lender ICICI Bank saw its net profit for the September quarter fall by 55.8 per cent to Rs 9.09 billion against Rs 20.58 billion a year ago, said the lender. While this is lower than Rs 9.49 billion according to a Bloomberg poll of analysts, the fall is largely due to a decline in other income.

The bank had reported its first-ever loss, amounting to Rs 1.2 billion, in the June quarter. The quarter also saw Managing Director (MD) and Chief Executive Officer (CEO) Chanda Kochhar going on leave in June, after facing allegations of conflict of interest. 

This was the bank’s first quarter under Sandeep Bakhshi’s leadership. He stepped in as interim CEO in June, and was appointed MD and CEO in October after Kochhar stepped down. 

“The bank will be focused on improving core operating profit with a granular and risk calibrated business growth,” said Bakhshi in a call with analysts.

 

ICICI Bank’s Chief Financial Officer, Rakesh Jha, said the bank will be moving away from project financing and ‘merger and acquisition’ projects the bank used to undertake earlier. 

Net interest income rose 12.4 per cent to Rs 64.18 billion in September 2018, compared with Rs 57.09 billion in the year-ago quarter.  

Non-interest income (or other income) was up just 6.6 per cent at Rs 31.91 billion for the quarter under review. While fee income grew by 17 per cent, treasury loss of Rs 350 million, against a profit of Rs 20.12 billion in the year-ago quarter, accounted for the muted growth in other income. Likewise, dividend income from subsidiaries also fell 59 per cent year-on-year to Rs 1.67 billion in the quarter.

Net interest margin (NIM) stood at 3.33 per cent, compared to 3.27 per cent in the year-ago period. In the June quarter, NIM was 3.19 per cent. 

The gross non-performing asset (GNPA) ratio for the quarter stood at 8.54 per cent, up 67 basis points over 7.87 per cent in the year-ago quarter. However, it was lower over the previous quarter’s GNPA ratio of 8.81 per cent.

Slippages during the quarter saw a decline at Rs 21.11 billion against Rs 36.45 billion in year-ago quarter, but were slightly higher than Rs 20 billion in the June quarter. 

“ICICI Bank results surprised positively, with lower slippages and improved margins. We believe an end to uncertainty in leadership and the opportunity to gain market share will help it add to its return ratios, said Lalitabh Shrivastawa, AVP, research, Sharekhan by BNP Paribas.

Provisions and contingencies fell annually as well as sequentially. The provisions for the September quarter stood at nearly Rs 40 billion, compared with Rs 45 billion a year-ago, and nearly Rs 60 billion in the previous quarter. “Provisions are likely to remain elevated and we will continue to keep a look on asset quality, particularly in corporate and small- and medium-sized enterprises segments,” said Bakhshi. 

The provision coverage ratio on non-performing loans, including cumulative, technical or prudential write-offs, stood at 69.4 per cent.

“We believe that the NPA cycle has peaked and the corporate banks, including ICICI Bank, are relatively better placed than before. Also, we believe multiple levers are available for the bank to improve its performance in medium to long term,” said Shrivastawa.

Casa (current accounts savings accounts) ratio was stable at 50.8 per cent against 50.5 per cent in the June quarter and 49.5 per cent in the year-ago quarter. 

Advances grew by 13 per cent to Rs 5,444 billion in the September period, while deposits grew at 12 per cent to Rs 5,586 billion. 

The bank’s exposure to the non banking financial sector (NBFC) stands at 5.4 per cent of advances, and said it is open to both lending to NBFCs as well as buying retail NBFC portfoilios.