ICICI Bank, the country’s second-largest private sector bank, announced a healthy 30% year-on-year (y-o-y) growth in net profit at Rs 9,122 crore for the January-March quarter, beating Bloomberg estimates of Rs 9,040 crore.
The spike in profits was led by growth in its net interest income, which grew by 40.2% y-o-y to Rs 17,667 crore for the quarter under review. The net interest margin for the quarter was 4.90% compared to 4% in the previous financial year.
Sandeep Batra, executive director, ICICI Bank, said the margin expansion was due to faster increase in the lending rate as compared to the deposit rate. However, he also indicated that the margins may have peaked. “I think with the repo probably at the peak or near peak, expansion on the income side has already taken place. Now catching up from the deposit side will take place. So obviously, we would believe that net interest margins would be near peak and there probably will be a downward bias as we progress,” Batra said in the post-earnings media call.
The bank’s total advances rose 18.7% y-o-y to Rs 10.2 trillion as on March 31. Domestic advances rose nearly 21% y-o-y.
However, what is interesting is that the bank’s yield on advances was 9.75% during the quarter, whereas the cost of deposits was 3.98%. The increase in the yield on advances was much sharper than the rise in deposit costs which explains the impressive margin expansion.
Meanwhile, gross non-performing asset ratio improved to 2.81% as on March 31 from 3.60% a year ago. Net non-performing asset ratio improved to 0.48% as on March 31 from 0.76% a year ago.
Gross non-performing assets fell to Rs 31,184 crore from Rs 33,920 crore a year ago.
The retail loan portfolio grew by 22.7% y-o-y, business banking portfolio grew by 34.9% y-o-y, small and medium-sized enterprises portfolio rose 19.2% y-o-y, and domestic corporate portfolio rose 21.2% y-o-y. The rural portfolio grew by 13.8% y-o-y as on March 31.
Around 46% of the loans are linked to repo rate, another 3% to other external benchmarks whereas 31% are fixed-rate loans and 19% are linked to MCLR (marginal cost of fund-based lending rate).
Total deposits grew by 10.9% y-o-y to Rs 11.8 trillion as on March 31. Total term deposits rose 17.1% y-o-y to Rs 6.4 trillion as on March 31. Average current account deposits rose 9.3% y-o-y, and average savings account deposits rose 7.5% y-o-y.
“At this point in time, we are very comfortable with our deposit growth,” said Batra, adding that deposit growth will not be a constraint in the bank’s ability to grow its assets in a risk-calibrated manner.
The fee income also rose nearly 11% y-o-y to Rs 4,830 crore in the quarter under review. Fees from retail, rural, business banking and SME customers constituted around 80% of total fees.
The gross non-performing asset additions were Rs 4,297 crore in the March quarter. Recoveries and upgrades of NPAs, excluding write-offs and sale, were `4,283 crore.
Provisions increased by 51.5% y-o-y to Rs 1,619 crore in the March quarter. Total provisions included a contingency provision of Rs 1,600 crore made on a prudent basis. Provision coverage ratio stood at 82.8% as on March 31.
The bank’s total capital adequacy ratio stood at 18.3% as on March 31.