ICICI Bank Profit Increased 22%
ICICI Bank Ltd., India’s largest private-sector lender by assets, Monday exceeded market expectations with a 22% jump in second-quarter standalone net profit as its loan portfolio grew and it benefited from a sharp decline in provisions.
Net profit for the July-September period rose to 15.03 billion rupees ($307.5 million) from 12.36 billion rupees a year earlier, beating the estimate of 14.18 billion rupees in a poll of six analysts.
Net interest income–the difference between interest earned and interest paid–rose 14% to 25.06 billion rupees.
Interest margin remained steady at 2.6% and the bank said it expects to maintain the margin at the current level in the fiscal year through March.
Despite expectations that aggressive rate tightening by the central bank–13 rate increases since March 2010–to tame inflation may hurt loan demand, ICICI Bank posted 20% growth in its lending business, in line with peers like Axis Bank Ltd. and HDFC Bank Ltd.
However, the rate increases have now started gradually hurting demand, especially for retail loans.
“While there is still growth in these [retail loan] businesses, the growth rates are much lower than what we have seen in the past,” ICICI Chief Executive Chanda Kochhar told reporters on a conference call.
The New York and India-listed bank expects to meet its estimated 18% loan growth target this fiscal year—the same as the Reserve Bank of India’s projection for the banking sector–by focusing on mortgage, vehicle, working capital and project finance loans.
In the past quarter, ICICI Bank’s provisioning, mainly against bad loans, more than halved to 3.19 billion rupees from 6.41 billion rupees.
Gross bad loans as a percentage of total loans fell to 4.14% from 5.03% a year earlier. The improvement in asset quality was partly helped by the bank’s now lower exposure to unsecured retail loans.
It started reducing its exposure to the unsecured segment after the global financial crisis in 2008-09 led to a spike in bad loans in that portfolio, including credit cards and personal loan.
The bank doesn’t expect any major shocks in bad loans in the next couple of quarters, Ms. Kochhar said.
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