Informist, Saturday, Apr 27, 2024

By Subhana Shaikh

MUMBAI – ICICI Bank reported a steady performance for the quarter ended March as a sharp fall in provisions and strong loan growth was offset by moderation in net interest margin. The private sector bank's net profit rose over 17% on year to 107.08 bln rupees, higher than analysts' expectations of 102.35 bln rupees. Sequentially, the bank's bottomline was up over 4%.

During Jan-Mar, provisions and contingencies declined nearly 56% on year, and 32% on quarter, to 7.18 bln rupees. This is despite the fact that the bank provided 5.10 bln rupees for its exposure to alternative investment funds. This came after the Reserve Bank of India in March tweaked its norms on investment in alternative investment funds.

According to the RBI, provisioning will be required only to the extent of investment by the lender in the alternative investment funds scheme, which is further invested by the fund in the debtor company. In December, the central bank had asked lenders to liquidate their investment in alternative investment funds within 30 days in schemes that, in turn, invest in debtor companies of the entities, or make 100% provision on such investments.

In a media call post earnings, Executive Director Sandeep Batra said that there is no proposal to invest in alternative investment funds yet. As on Mar 31, the bank held contingency provisions of 131 bln rupees. On Friday, shares of the private sector bank closed 0.5% lower at 1,107.90 rupees on the National Stock Exchange.

Speaking about the health of the bank's information technology infrastructure, Batra said that the resilience of its IT infrastructure and systems is paramount and that the expenditure on IT has increased to 9.4% in 2024, from 5.6% in 2019, of the total expenditure. In Jan-Mar, the bank's total expenses rose 28% on year to 285.58 bln rupees.

"There could be ongoing instances of outages and errors in any bank. Regarding discussions with the regulator, this is in ongoing discussions on every aspect that we have, and we remain focused on complying with regulatory guidelines which RBI has laid out from time to time," Batra said.

This has come as the RBI on Wednesday asked Kotak Mahindra Bank to stop onboarding new customers through its online and mobile banking channels and issuing new credit cards after it observed serious deficiencies and non-compliances in information technology management.

Robust traction in the bank's loan growth has aided its Jan-Mar earnings. As on Mar 31, ICICI Bank's total loans grew 16% on year to 11.84 trln rupees. Within this, net domestic advances were 11.50 trln rupees, up nearly 17%. Within domestic loans, retail loans grew 19% on year, led by a 15% growth in mortgage loans to 3.95 trln rupees.

Personal loans, which contributed 18% to the bank's retail portfolio, recorded 33% on-year rise to 1.16 trln rupees. Batra said that the bank has recaliberated its growth in the personal loan segment.

On the other hand, total deposits rose nearly 20% on year to 14.12 trln rupees, as on Mar 31. The average current account, savings account ratio was 38.9% as on Mar 31, as against 39.4% a quarter ago. Responding to a query on loan-deposit dynamics, Batra said that the bank is not going to raise deposits at any cost.

ICICI Bank's net interest income--the difference between interest earned and expended--was 190 bln rupees, up 8.1% on year. Profitability, which has been a challenge for the banking industry, capped the bank's earnings performance.

For the reporting quarter, net interest margin fell to 4.40% from 4.43% a quarter ago and 4.90% a year ago. "We expect NIMs (net interest margins) to be rangebound adjusted for seasonality of cost. Going ahead, we do expect RBI to take a shallow rate cut, and we will see how this will move during the course of the year," Batra said.

Overall, the asset quality of the bank continued to witness an improvement, with the gross non-performing assets ratio declining to 2.16% as on Mar 31 from 2.30% a quarter ago. The net bad loan ratio fell slightly to 0.42% as on Mar 31 from 0.44% on Dec 31.

For the quarter under review, the bank had slippages of 51.39 bln rupees. Batra said that the retail segment and rural and business banking contributed the most to the slippages. For the financial year ended Mar 31, ICICI Bank opened 623 branches and for 2024-25 (Apr-Mar), the management expects to open a similar number of branches.

The bank's board also approved raising 250 bln rupees through the issue of bonds in the domestic market on a private placement basis and up to $1.50 bln for one year. The board also recommended paying a dividend of 10 rupees per share. End

Edited by Aditya Sakorkar

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