ICICI bets on retail loan growth, says corporate recovery still a few quarters away

ICICI Bank, the country’s largest private lender, logged a better-than-expected net profit in the April June quarter and a stable trend in the asset quality, keeping in line with the earnings of other large private sector banks, which announced the quarter earnings last week.

Notably, the growth in retail loans and other incomes have primarily supported the profit numbers of ICICI, while the bank grew its corporate loan book at a slower pace, which it attributed to muted loan demand from companies for new projects in a sluggish economy.

ICICI Bank posted a net profit of Rs 2,655 crore in April-June beating an estimate of Rs 2,573 crore forecast by analysts in a CNBC-TV18 poll. In the year-ago quarter, the bank had posted a net profit of Rs 2,274 crore. That marks a 17 percent jump in the profit numbers year-on-year.

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ICICI Bank’s retail loan book grew by 26 percent on year, while loans to corporations and small and medium enterprises (SME) grew at a slower pace, Chanda Kochhar, managing director and chief executive officer of the bank said.

“We have continued to adopt a calibrated approach in the corporate and SME segment,” Kochhar said. Of the retail loans, home loans grew 25 percent and auto loans grew by 46 percent, Kochhar said, adding the bank expects growth in retail portfolio to continue above 20 percent.

The domestic loan portfolio of the bank grew 17 percent in the June quarter. Total loan book of ICICI, as of end June, stood at Rs 3.47 lakh crore, up 15 percent, from Rs 3.01 lakh crore in the year-ago period. Deposits grew to Rs 3.35 lakh crore from Rs 2.95 crore in the year-ago period.

“Going forward, as economy rebounds, there will be an increase in the working capital loans for corporate sector. But that will come with a lag and is a few quarters away,” Kochhar said.

Private sector banks have posted better numbers compared with state-run banks, which have reported a surge in their bad loans. Last week, HDFC Bank and Axis Bank had posted lower-than-estimated earnings but their numbers came better than that of state-run banks.

While HDFC Bank posted a 21 percent jump in its net profit for the quarter ended 30 June, Axis Bank, posted a net profit of Rs 1666.76 crore, up 18.3 percent on year for the quarter ended 30 June. Both banks reported more or less stable trend in the June quarter bad loan numbers.

Gross non-performing assets (NPAs) of ICICI Bank stood at 3.05 percent in the June quarter compared with 3.2 percent in the year-ago quarter, showing a marginal improvement, while net NPAs, or bad loans after making provisions, stood at 0.99 per cent from 0.82 percent.

According to Kochhar, though the additions of bad and restructured loans will continue, the overall additions will be lesser than last year.

Net interest income of the bank, or the core income, rose to Rs 4,492 crore in the June quarter, up 18 percent, compared with Rs 3,820 crore in the corresponding quarter last year. Net interest margin (NIM), the spread between interest earned and interest expended, improved to 3.4 percent compared with 3.35 percent in the preceding quarter and 3.27 percent in the year-ago quarter.

The bank expects to achieve an NIM growth of 3.3-3.4 per cent for the full year, Kochhar said.

Total provisions of ICICI, during the quarter, stood at Rs 726 crore in June quarter, higher compared with Rs593 crore in the same period last year. The capital adequacy ratio, a key measure of health of the banks, stood at 17.39%.

According to analysts, there has been a decline in the pace of addition of bad and restructured loans on the books of Indian banks, but that is attributable to large-scale restructuring of loans and sale of bad assets than a genuine improvement in the bad loan scenario.

Shares of ICICI Bank were trading down 1.2 percent at Rs 1,472 on the BSE, in line with the broad market trend. The benchmark Sensex was down 0.7 percent.