ICICI Bank on Monday reported a 21.6% y-o-y increase in stand-alone net profits for the quarter ended September 2011, to R1,503 crore, on the back of a sharp 50% drop in provisions and a 14% growth in the top line.

The private sector bank beat analysts estimates on Bloomberg, who had forecast a profit of R1,420 crore. Operating profits came in at R2,354 crore, a rise of 6.4% y-o-y, as non-interest income rose just 10.3% to R1,740 crore. The bank’s total income rose 25.5% to R9,897 crore, led by a 13.7% growth in net interest income at R2,506 crore. Shares of ICICI Bank on Monday closed 0.26% lower at R930.5 on the Bombay Stock Exchange (BSE), outperforming the benchmark Sensex, which declined 0.56%, while underperforming the banking sector index, which rose 0.72%.

Despite the higher cost of funds, which increased 80 basis points, the bank’s net interest margin (NIM) remained flat at 2.6%. Moreover, the balance sheet has become cleaner with net non-performing loans (NPL), declining 24 basis points sequentially to 0.93% from 1.04% at the end of June 2011 quarter. Provisioning and contingencies dropped 50.3% y-o-y to R319 crore from R641 crore a year earlier as asset quality improved. ?Now that unsecured retail loans form very small percentage of our total portfolio, less provisioning is required, ? said Chanda Kochhar, CEO and MD, ICICI Bank. Kochhar added that bringing down provisions from the current level would be difficult. ? We are already operating at a very high efficiency level but, at the same time, we don’t expect any major shocks of any kind, ? she explained.

Kochhar said the bank will increase lending rates only if cost of funds goes up. ?The decision to increase rates is a mix of not just the policy announcement, but also the liquidity situation, the rate of credit and deposit growth and the cost of funds, ? she said. While loan growth was a strong 20% y-o-y, Kochhar observed that there has been some moderation in demand on the retail front, some of it anticipated in a rising interest rate scenario. However, she pointed out that disbursements to the corporate sector related to prior sanctions, though the pipeline was fairly strong.

?For us, the growth in coming mainly from housing and vehicle loans, working capital and project disbursements from the past sanctions,? she said. The bank?s outstanding loans at the end of September were R2.34 lakh crore up from R1.94 lakh crore a year ago, while advances grew 6.4% sequentially. The bank?s liabilities franchise continued to improve with the Casa (current and savings accounts) ratio up 20 basis points sequentially to 42.1% at the end of September. Meanwhile, ICICI Bank’s consolidated net profit grew 43% for the quarter ended September 2011 to R1,992 crore compared with R1,395 crore a year ago driven by profits at its biggest subsidiary ICICI Prudential Life Insurance, which jumped to R350 crore from R15 crore.