The share price of ICICI Bank
shot up by 11.5 per cent after it declared results for the second quarter of financial year 2021-22 (Q2FY22), that provided positive surprises on several counts.
Revenue, net profits, net interest margin (NIM), and net interest income (NII) all rose. Slippages were marginal and the management was optimistic. Retail is expected to continue driving growth through the next few quarters.
Revenues came in at Rs 11,690 crore in Q2, a 25 per cent rise YoY over Rs 9,370 crore in Q2FY21. It was also a 6.9 per cent increase quarter-on-quarter (QoQ) versus Rs 10,940 crore in Q1.
Operating profits were up 20 per cent (YoY) at Rs 9,910 crore, over Rs 8,260 crore last year. This came despite operating expenses rising 28 per cent YoY and 8.8 per cent QoQ to Rs 6,570 crore. Net profits jumped 29.6 per cent YoY to Rs 5,510 crore, versus Rs 4,250 crore in Q2FY21, and up 19.3 per cent QoQ.
At Rs 2,710 crore, provisions declined by 9.7 per cent YoY and 4.9 per cent QoQ. Gross NPAs were held at 4.8 per cent of assets, versus 5.2 per cent in Q2FY21, and 5.2 per cent in Q1. Net NPAs were maintained at 1 per cent. Provision coverage ratio (PCR) was 80 per cent, which is among the best in the industry.
Fresh slippages dropped to Rs 5,580 crore, versus Rs 7,230 crore in Q1. Restructures rose to Rs 9,680 crore, versus Rs 4,860 crore in Q1, with provision of about Rs 1,950 crore. The tenure of moratorium for restructured loans averages to about one year. The bank also continues to hold Covid provisions of Rs 6,425 crore.
Employee expenses increased by 21 per cent YoY, with employee count rising 8,000. This includes a cost of Rs 125 crore due to valuation of ESOPs granted to all employees after April. However, the YoY comparisons are off a low base, so this trend of rising expenses might ease.
Domestic loans grew 4 per cent QoQ, led by business banking
(12 per cent QoQ), retail loans (5 per cent QoQ), and small and medium enterprises (11 per cent QoQ). Mortgages increased 6 per cent QoQ.
The unsecured portfolio saw personal loans and credit card growing by 6 per cent and 16 per cent QoQ, respectively. The personal and vehicle loans segments are back to March 2020 (pre-Covid) levels.
Fee income growth was also strong at 21 per cent QoQ. The NII was up 25 per cent YoY and 7 per cent QoQ, and there was about 10 basis points QoQ improvement in NIM to around 4 per cent. Private corporate loans are an area of underperformance. The return on assets was around 1.5 per cent, while return on equity was about 13.2 per cent. The cost of funds was a blended 4.4 per cent.
The management is very optimistic about the second half of FY22, with a further acceleration of retail growth expected in the festive season. Most analysts are highly optimistic too, and several of them picked the bank as the best stock in the private banking
The subsidiaries contributed around Rs 580 crore in dividend income. A sum-of-the-parts valuation of the two insurance subsidiaries, ICICI Securities and the ICICI Prudential AMC, would add up to anywhere between Rs 120-200 crore, according to various estimates. Given the surge on high volumes, the price trend for the stock is extremely bullish.
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