REUTERS - ICICI Bank, India's No. 2 lender, posted on Friday a larger-than-expected 31 percent rise in quarterly profit and forecast a higher growth rate for domestic loans and stable asset quality for the coming year.
Loan demand in India is expected to pick up after the central bank last week cut its benchmark lending rate for the first time in three years to help revive sagging economic growth.
The Reserve Bank of India has projected loan growth for Indian banks for fiscal year 2013 at 17 percent against 16 percent in the previous year.
ICICI expects its domestic loans to grow 20 percent in the year that began in April from 17 percent last year, driven by demand from companies for working capital, home and car loans, Chief Executive Chanda Kochhar told reporters.
"These numbers may give us comfort to keep what we have (but) we don't have any particular plans to increase our stakes. We have concerns about the India story in general," said Olsson Jan-Olov, portfolio manager of Carnegie Emerging Markets at Sweden, which owns ICICI shares.
"We have been a little hesitant towards increasing positions in India due to the overriding political and macro economic situation."
Earlier this week, Standard & Poor's cut India's credit rating outlook to negative from stable on hefty fiscal and current account deficits and political paralysis in Asia's third-largest economy.
The negative outlook jeopardises India's long-term rating of BBB-, the lowest investment grade rating.
Indian banks are actively easing terms on loans for companies, as high interest rates and an economic slowdown has hurt the ability of some to repay loans on time. Power, textile, aviation, construction and real estate are the hardest hit sectors.
ICICI, which is also listed in New York (IBN.N) and competes with State Bank of India (SBI.NS) and HDFC Bank (HDBK.NS), sees a "very small" and "minimal" pipeline for corporate debt restructurings, Kochhar said.
Net profit rose to 19.02 billion rupees in the fiscal fourth-quarter ended March from 14.5 billion reported a year earlier. Analysts on average had expected profit of 17.3 billion rupees, according to Thomson Reuters I/B/E/S.
Consolidated profit grew 15 percent to 18.1 billion rupees, the bank said.
Net interest income increased nearly 24 percent to 31.05 billion rupees. Other income, which includes gains from trading in bonds, equity and currency as well as fees, rose nearly 36 percent to 22.3 billion rupees, said the bank.
ICICI's loans grew 17 percent to nearly $50 billion, it said. Net interest margin, a key gauge of profitability for a bank, rose to 3.01 percent from 2.74 percent a year ago.
Provisions, including for bad loans, rose more than a fifth to 4.7 billion rupees from 3.8 billion a year earlier, while net non-performing loans dropped to 0.73 percent of total assets from 1.11 percent, the bank said.
ICICI, which was hit by the 2008 financial crisis due to aggressive lending, had been paring its unsecured retail book, especially credit cards and personal loans. It is cautiously growing lending in the home and auto loans segment now, at a much slower pace.
ICICI is exposed to a number of troubled companies, including Kingfisher Airlines (KING.NS) and telecom tower owner GTL, which have restructured billions of dollars of loans in recent months.
"We have always been saying the worries, that the outside environment talks about asset quality, are much higher than the reality is," CEO Kochhar said.
"We don't expect our provisioning requirement to go up substantially as a percentage of total assets."
Shares of the bank, valued by the market at $18.5 billion, rose 2.3 percent on Friday to 860.85 rupees in a flat Mumbai market.
(Editing by Muralikumar Anantharaman)