ICICI Bank: Staying on course

ICICI Bank's net interest income and fee income stay robust

ICICI Bank had a great quarter once again with its net interest income rising 47 per cent y-o-y and fee income improving a smart 62 per cent in Q1 FY07.

Its net interest margin was also maintained at 2.5 per cent, the same as in the June 2006 quarter. As a result, operating profit went up 54 per cent y-o-y, which is a major improvement over the June quarter y-o-y growth of 27 per cent.

Excluding treasury income, operating profit growth was even better at 65 per cent. Treasury income went up 20 per cent as the bank sold its 3.7 per cent stake in IDFC. Though other expense items were under control, staff costs went up 59 per cent y-o-y.

Credit demand remains robust, so it is no surprise to see ICICI Bank's net customer assets increased 47 per cent. But retail assets increasing 57 per cent even on a high base, and crossing the Rs 1 lakh crore mark, is noteworthy.

Low-cost deposits (savings and current accounts) accounted for 23 per cent of total deposits. Profit after tax increased 30 per cent owing to 133 per cent increase in provisioning, as premium amortisation on gilts and standard asset provisioning increased.

Growth in retail assets may slow down from current levels, but with demand for money increasing from corporates, credit growth should remain robust.

Deposits grew 57 per cent in Q2, faster than credit growth, which should help in funding additional demand. Thus, investors can expect net interest margins to remain at least at the current levels.

The stock has appreciated a huge 49 per cent against the Sensex gaining 25 per cent over the past three months. The stock trades at about 2.65 estimated FY07 book value and 2.3 times FY08 book value and is among the best stocks in the sector.