ICICI Bank Q2 net falls 34% to Rs 2,058 cr but bad loans stabilise

A municipal worker walks past a logo of ICICI Bank at its headquarters in Mumbai (Photo: Reuters)

Private lender ICICI Bank saw a 33.7 per cent year-on-year decline in net profit for the September quarter (Q2), but also saw some improvement in asset quality.

Net profit was Rs 2,058 crore for the quarter, against Rs 3,102 crore in July-September 2016. The profit is also lower than analysts estimates of Rs 2,570 crore, according to a Bloomberg poll. The decline was due to lower gains on sale of the bank’s stake in its general insurance subsidiary during the quarter, as against that on sale of stake in their life insurance subsidiary in the second quarter last year, said its Managing Director and Chief Executive Chanda Kochhar in media conference call.

Non-interest income, comprising revenues from treasury, fees, commissions declined sharply to Rs 5,186 crore in Q2 from Rs 9,119 crore the year-ago quarter. Non-interest income included gains of Rs 2,012 crore sale of shareholding in ICICI Lombard General Insurance. The previous year’s quarter included gain of Rs 5,682 crore on sale of shareholding in ICICI Prudential Life Insurance. If these one-time gains are excluded, the operating profit was up 0.4 per cent year-on-year at Rs 4,975 crore. 

Net interest income rose by 9 per cent to Rs 5,709 crore in Q2, from Rs 5,253 crore in the corresponding period of the previous year.  Net interest margin (NIM) was flat at 3.27 per cent for the second quarter over Q1FY18, but improved against 3.13 per cent in Q2FY17.  

Fee income rose by 9 per cent year-on-year to Rs 2,570 crore. Asset quality slipped as the gross non-performing assets (NPAs) ratio at 7.87 per cent as of September 2017, against 6.12 per cent as of September 2016. However, compared to the June quarter (Q1FY18) figure 7.99 per cent, it was a slight improvement. The slippages (loans turning bad) also fell to Rs 4,974 crore, down from Rs 4,976 crore in Q1 and Rs 8,029 crore in year ago period.

While the results came after market hours with no negative surprises packed in, investors seem to be happy. ICICI Bank’s American Depository Receipts listed on the NYSE was up 1.5 per cent, at 8 pm IST.

The provision coverage ratio (PCR) was 59.3 per cent in September 2017, marginally down from 59.6 per cent in September last year, but higher by 410 basis points over the quarter ended June 2017. 

The bank has made a provision of Rs 651.17 crore for the 12 accounts referred to National Company Law Tribunal (NCLT). While bank had option to spread provisions burden over three quarters, it decided to make one-time provision in second quarter its self.

It has also made a provision of Rs 3,298 crore for the second consortium list, which works out to a provision coverage of 31.5 per cent of outstanding loans amount of Rs  10,337 crore.

Asked about the Reserve Bank of India's annual audit for FY17, Kochhar said, “We still await the final report from RBI. The inspection process is still going on.” The outcome of the RBI assessment will be out in the December quarter for ICICI Bank.  This has become crucial as banking regulator had asked many banks such as YES Bank, Axis Bank and Lakshmi Vilas Bank to restate their NPAs numbers for FY17 to reflect the divergence in estimates between those of banks and the RBI.  

ICICI Bank's total advances increased by 6 per cent year-on-year to Rs 4,82,780 crore at September 30, 2017. Domestic advances grew by 13 per cent backed by 19 per cent expansion in retail loans portfolio. The domestic loan growth is expected to be about 15 per cent for FY18, Kochhar added. 

Total deposits increased by 11 per cent year-on-year to Rs 4,98,643 crore for the quarter. Current and Savings Accounts (CASA) deposits increased by 20 per cent year-on-year to Rs 2,46,876 crore in September quarter, bringing the bank’s CASA ratio to 49.5 per cent. The bank’s total Capital Adequacy Ratio (CAR) was at 17.89 per cent and Tier-I CAR was at 14.85 per cent as on September 30, 2017.

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