ICICI Bank surprised the market by posting a net profit of Rs 2,250 crore for the December quarter as against Street expectations of Rs 2,080 crore, aided by higher fee income, better margins, lower provisioning and strong performance from the corporate banking division, all of which indicate a healthy performance in core business.
A 30 per cent jump in net profit over the previous year was the result of a similar growth in net interest income during the year. Though retail loan growth at 17 per cent is lower than corporate loan growth of 20 per cent, it is an improvement over the 14 per cent growth in the September quarter. The bank hopes the retail growth will be better.
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 periods was Rs 1,657 crore, Rs 1,488 crore and Rs 1,923 crore, respectively.
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 per cent from 1.57 per cent a year back while its capital adequacy ratio has increased to 19.53 per cent from 18.88 per cent in the previous year, indicating sufficient fuel to fund future growth. Net interest margin too, increased 37 basis points to 3.07 per cent over the year as cost to income ratio fell to 39.5 per cent from 41.5 per cent a year back. And the bank was able to keep its cost of funds low by maintaining its CASA at 40.9 per cent of total deposits.
Net non-performing assets (NPA) have come down to 0.76 per cent as compared to 0.83 per cent 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 these, 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 per cent.
ICICI Bank’s management expects to continue its strong performance by posting a 20 per cent growth in advances, with retail loan growth catching up with corporate loan growth of 20 per cent and further improvement in its margins.
