ICICI Bank slow on loans, but treasury income helps

Written by fe Bureaus | Mumbai | Updated: Oct 31 2009, 06:48am hrs
ICICI Bank beat analysts expectations to report a 2.5% rise in its Q2 net profit on Friday, while its chief executive officer Chanda Kochhar painted an optimistic picture of the banks future.

There will not be any balance sheet contraction anymore from the global financial meltdown, she said in a conference call.

The market welcomed the results and the outlook, sending the ICICI share up by 2.38% on the Bombay Stock Exchange to Rs 789.60 at close. The banks shares have risen 71% this year, surpassing the Sensexs 64 % rise in 2009.

The net profit of the countrys second largest bank increased to Rs 1,040 crore against Rs 1,014 crore in the same quarter last year, largely on higher income from trading in bonds and currency; treasury income rose to Rs 2.97 lakh crore against a loss of Rs 1.53 lakh crore reported a year earlier.

Kochhar said the bank will continue to reduce its exposure to retail unsecured loans (credit cards and personal loans) but that will be offset by growth in other types of loans. I am very optimistic on the growth of home loans, car loans and infrastructure loans, she said.

Speaking to FE, Kochhar acknowledged that the growth of profit was restricted by the 35% drop in the fee-based income. For the quarter, the bank earned Rs 1,386 crore as fees versus Rs 1,876 crore in the same quarter last year.

As part of its new strategy, the private bank reduced its loan portfolio to Rs 1,90 lakh crore in the quarter from Rs 2,21 lakh crore a year ago. Its deposit base too shrank to Rs 197,832 crore against Rs 223,402 crore for the comparable periods. Because of the changes, as on September 30, 2009, the banks capital adequacy ratio stood at an impressive 17.69%.

We took a cautious decision to focus on mobilising resources mainly through the CASA route, hence the fall registered in the deposit base of the bank in the reporting period on a year-on-year basis, said Kochhar. The banks CASA ratio increased to 36.9% by September end from 30% a year back and 30.4% on June 30, 2009. This is quite a change from the banks practice of sourcing easy funds from the global money market.