NII is the difference between interest earned and interest expended.
Private sector lender ICICI Bank on Saturday reported a Rs 1,908-crore standalone net profit in the June quarter of FY20, against a Rs 120-crore loss owing to a 41.5% year-on-year (y-o-y) fall in provisions to Rs 3,496 crore, a 27% y-o-y rise in net interest income (NII) to Rs 7,737 crore.
NII is the difference between interest earned and interest expended. Net interest margin (NIM) — a key measure of profitability — stood at 3.61%, down nine basis points (bps) from 3.7% in the previous quarter. Additions to gross non-performing assets (NPA) decreased to Rs 2,779 crore in the June quarter from Rs 3,547 crore in the March quarter. ICICI Bank’s gross NPA ratio at the end of June stood at 6.49%, 21 bps lower than 6.7% at the end of March, while the net NPA ratio decreased 29 bps sequentially to 1.77% from 2.06% as on March 31. On June 30, 2019, the fund-based and non-fund based outstanding to borrowers rated BB and below was Rs 15,355 crore, down from Rs 24,629 crore on June 30, 2018.They constituted 3.5% of the bank’s loan book.
Recoveries and upgrades of NPAs were to the tune of Rs 931 crore, while loans worth Rs 2,200 crore were written off. The provision coverage ratio on NPAs, excluding cumulative technical write-offs, increased to 74% in June 2019 from 54% in June 2018. Total advances at the bank grew 15% y-o-y to Rs 5.92 lakh crore. Retail assets saw a 22% y-o-y growth, with 8% of the bank’s total loan book being made up of retail unsecured loans. Excluding non-performing and restructured loans, the growth in domestic corporate loans was about 13%. Sandeep Batra, executive director (designate) at the bank, admitted that from a macroeconomic perspective, there has been a slowdown both in consumption and auto sales. “However, the services sector continues to do well and we are seeing some improvement in capacity utilisation in the public sector,” Batra said.
He refused to offer any guidance on credit growth for the full year. “We are not targeting any particular lavel of loan growth. However, we are seeking to improve our share of the profitable market share by making our delivery to the customer service more seamless and frictionless through digitisation and process improvement,” Batra explained.
Total deposits increased by 21% y-o-y to Rs 6.61 lakh crore and the bank’s current account savings account (CASA) ratio stood at 45.2%, down from 50.5% a year ago. Average CASA deposits rose 12.3% y-o-y in Q1FY20. Term deposits increased 34% to Rs 3.62 lakh crore. Batra said the bank is focused on the daily average balances of CASA deposits as that contributes to NII.
“We have said that in this scenario, the growth in the average CASA deposits would be lower than the overall growth in deposits that we see and that is what was reflected in the current quarter,” he said, adding that in the current environment, people are putting more money into fixed deposits and CA deposits are not growing as strongly for the banking system. The bank’s total capital adequacy ratio (CAR) as per RBI guidelines on Basel III norms was 16.19% and its tier-1 capital adequacy (CET-1) ratio stood at 14.6% on June 30, as compared to the minimum regulatory requirements of 11.08% and 9.08% respectively.