Banking stocks have been beaten down through the week, with the BSE Bankex falling 3.6 per cent. The public sector banks have seen a major sell-off, dragging the CNX PSU Bank Index down 10 per cent. In this environment, ICICI Bank’s first quarter numbers have come as a big relief. Despite the weak environment, India’s largest private sector bank has managed to grow its net profit by 36 per cent to Rs 1,815 crore in the June quarter. Analysts say this has been driven by healthy loan growth and robust net interest margins.
Operationally, this has been a good quarter for the bank, as its profit has been largely driven by net interest income, which has grown 32 per cent year-on-year (y-o-y) to Rs 3,193 crore. Analysts say the company’s strategy of focusing on profitable growth is yielding dividends. Though cost of funds has not come down much, ICICI has managed to expand net interest margin 40 basis points to 3.01 per cent y-o-y.
Overall, it’s been a strong quarter operationally for the bank as it has managed to grow its loan book 22 per cent and yet, asset quality has not come under stress. The bank’s Casa (current account/savings account) ratio has stayed at 40.6 per cent. In the past, the ratio of low-cost deposits has been low for the bank, explain analysts. But over the last four to five quarters, the bank’s focus on both assets and liabilities is paying off.
Another big positive this quarter has been stability in asset quality. Even as several sectors are grappling with slowing growth and heading for debt restructuring, ICICI Bank’s loan book does not show stress. Net non-performing assets (NPA) of the bank decreased 17 per cent annually to Rs 1,941 crore in Q1. The net NPA ratio decreased to 0.61 per cent from 0.91 per cent in the corresponding quarter in the previous year and 0.62 per cent in the fourth quarter of FY12. Vaibhav Agarwal of Angel Broking, says: “We had been building in higher provisioning expenses towards NPAs, in line with the management’s own assessment that their NPAs, too, could increase marginally due to the weak environment. But, for another quarter the bank has managed to broadly hold on to good asset quality, with the net NPA ratio declining for another quarter and provisioning expenses coming in below our estimates.”
The bank expects a loan growth of 20 per cent in FY13 and analysts believe this seems achievable. On the back of such growth, analysts believe, the bank will continue to post robust earnings this year.