13% rise in ICICI net

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India’s largest private sector lender, ICICI Bank, on Wednesday reported 13 per cent increase year-on-year in standalone net profit at Rs 2,532 crore on a healthy rise in net interest income and other income during the third quarter ended December 2013.

The bank paid an additional tax provision of Rs 215 crore for deferred tax liability on special reserve for the nine months ended December 31, 2013, which impacted the profit.

During the three quarters April-December of 2013-14, the bank’s net profit on standalone basis rose by 19 per cent to Rs 7,158.47 crore as against Rs 6,021.40 crore in same period of 2012-13.

Chanda Kochhar, managing director and chief executive officer, ICICI Bank, said during a conference call post the announcement of its quarterly numbers, “Had this deferred tax liability not been there, the bank would have registered a 22 per cent increase in net profit for the quarter and also for the nine months. The rise in profit is a result of healthy growth (in banking operation).”

Net interest income (NII), the difference between interest earned and interest expended, grew at a healthy pace of 22 per cent to Rs 4,255 crore aided by healthy loan book growth of 16 per cent (which was led by 22 per cent growth in retail portfolio) and sequentially stable margins.

Other income grew by 26 per cent to Rs 2,801 crore during Q3, while fee income rose by 13 per cent to Rs 1,997 crore in the quarter gone by.

On the asset quality front, absolute gross NPAs increased marginally by 4 per cent quarter on quarter, while net NPAs increased 16 per cent QoQ, as provision coverage ratio came off by 310 basis points quarter on quarter to 70 per cent. The write offs were at Rs 500 crore, while recoveries at Rs 356 crore in third quarter. Additionally, the bank’s outstanding restructured book increased by around Rs 1,800 crore during the quarter. It expects more additions to NPAs and to the recast loan book.

“The restructured loans in the pipeline is about Rs 3,000 crore. The industry continues to see addition to NPAs and restructured assets. We have not seen the full impact and, therefore, expect more additions to restructured assets and NPAs,” said Kochhar. She said that the asset quality pressure would come from large companies and small and medium enterprises.

She said that the bank is continuing with a calibrated approach in the corporate segment which grew by 7 per cent during the quarter, compared with 11 per cent in the previous quarter.

On a consolidated basis, the bank’s net profit rose 9 per cent YoY to Rs 2,872 crore during Q3 from Rs 2,645 crore during the same period of last year. It’s operating profit grew by 29 per cent to Rs 4,439 crore for the quarter ended December 31, 2013. The bank’s total income during Q3 increased to Rs 14,255.96 crore, from Rs 12,352.91 crore in the year-ago period. The bank mobilised $2 billion via FCNR B swap window.

Rakesh Tarway, vice-president and head of equity strategy, equity and derivative products, Motilal Oswal Securities, said, “Continuity of top management, lower asset quality issues, adequate capitalisation, strengthening liability franchise and low hanging fruits and its ability to capture market share from state-owned banks due to superior service will keep valuation of ICICI Bank intact.”

Vaibhav Agrawal, vice president – research banking at Angel Broking, said, “Though near-term outlook for the bank remains challenging, given the current macro environment, from a structural point-of-view compared to peers, keeping in mind its robust franchise and capital adequacy (total CAR at 16.8 per cent and Tier-I at 11.5 per cent), it remains one of the preferred banks, in our view, from a medium term perspective. We maintain buy with a price target of Rs. 1,366.”


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