 "ICICI Bank's profitability gets a boost as NIMs rise in Q2")
It's not just the technology and pharmaceutical companies that are springing postive surprises on the market. Even though the quarter started on a rather challenging note for the banking sector with the RBI increasing short-term interest rates, ICICI Bank has managed to surprise the Street on most counts.
The bank's managed to grow fee income, expand its net interest margins (NIIMs) and keep asset quality stable.
Even as most banks have seen their net interest margins decline, ICICI Bank's NIMs have expanded by 4 basis points sequentially and 31 basis points annually to 3.31%. While domestic NIMs remained stable, those for the international business expanded by 20 basis points from 1.60% seen in the first quarter of FY14. Rikesh Parikh VP-Markets Strategy and Equities, Motilal Oswal Securities, says the NIM expansion came as a positive surprise and also led to higher profits.
Also Read
Excluding its subsidiaries, the bank's net profit grew by 20% year-on-year to 2,352 crore in the second quarter. The profit figures could have been better had the company chosen to stagger its marked-to-market provisions on its investment portfolio over three quarters, as has been allowed by the RBI. The Bank has fully recognised the mark-to-market provisions of Rs 279 crore on its investment portfolio in the second quarter. The bank's operating profit excluding treasury increased 31% year-on-year to Rs 3,967 crore.
The rise in the fee income and reduction in operating expenses further gave a leg-up to the bank's overall profitability. Fee income increased by 17% to Rs 1,994 crore year-on-year, cost to income ratio declined to 37.3% in Q2 from 41% in the corresponding quarter last year.