Indias largest private sector bank, whose net profit growth has averaged 29% y-o-y in the last seven quarters, saw advances increase just 14% y-o-y in the fourth quarter. The last time the banks profit and loan growth were slower than this was in in the second quarter of FY11, when profits grew at 18.8% and loan growth was 5.3%.
More disappointing for investors was CEO & MD Chanda Kochhars observation that interest rates would come off only with a lag even if the RBI trims policy rates when it meets to review monetary policy on May 3. Monetary transmission will happen with a lag because liquidity remains tight and pressure on deposit growth continues. Moreover, the mix of deposits is not favourable since Casa (current account, savings account) isnt growing fast enough, Kochhar told reporters in a post-results conference call. Kochhar felt that unless deposits started growing substantially, even a cut in the cash reserve ratio(CRR) might not prompt meaningful monetary transmission.
Although demand for credit for project finance remains weak, Kochhar expects a pick-up in the latter part of the year to help the bank grow its loan book in the home market by 20% in the fiscal against an estimated 16-17% for the sector. In the fourth quarter, the banks loan book grew 18% y-o-y.
There are no new projects coming up yet for financial closure and the demand right now is for working capital but we estimate there could be some revival in the second half of the year, Kochhar said.
ICICI Banks total income for the March quarter rose just 10% y-o-y and while net interest income at 22% y-o-y saw a reasonably good increase, other income fell 1% y-o-y. The bank hopes to improve on its net interest margin (NIM) of 3.1% for FY13 after reporting a NIM of of 3.3% for the March quarter, a rise of 23 basis points (bps) over the December quarter.
On investigations in allegations of money laundering, Kochhar asserted that both the internal inquiry as also the inquiry by Deloitte revealed that no actual transactions were found to have taken place.
The banks asset quality remains stable with gross non-performing assets (NPAs) sequentially down 9 bps at 3.22%, and net NPAs rising 1 bps to 0.77%. Our current credit costs are 66 basis points and depending on the environment, its possible they could go up to about 75 basis points, Kochhar said.
Fresh additions to NPAs in the fourth quarter were lower at Rs 779 crore, compared with Rs 862 crore in the previous quarter while net restructured assets were Rs 788 crore. Provisions rose sequentially to Rs 460 crore from Rs 368.7 crore, while the provision coverage ratio (PCR) is now 76.8%. The banks CASA ratio improved to 41.9% at the end of March, from 40.9% on December 31, 2012. Total deposits stood Rs 2,92,614 crore, up 15% y-o-y. ICICI Banks capital adequacy stood at 18.74% at the end of March 2013, compared with 18.52% at the end of March 2012.