ICICI Bank Q2 profit zooms to record high as core income rises, COVID-19 provisions dip
ICICI Bank’s profit after tax jumped to ₹4,251 crore as against ₹655 crore in the year-ago period, which is the highest quarterly growth in its history
ICICI Bank on October 31 reported over four-fold jump in consolidated net profit at ₹4,882 crore for September quarter driven largely by core income growth and lesser provisions for the pandemic-related impact.
In the year-ago quarter, the profit stood at ₹1,131 crore.
On a standalone basis, the second largest private sector lender’s profit after tax jumped to ₹4,251 crore as against ₹655 crore in the year-ago period, which is the highest quarterly growth in its history.
The core net interest income (NII) moved up 16% to ₹9,366 crore despite a 0.10% contraction in the net interest margin (NIM) to 3.57% and credit growth being nearly half that of deposit growth at 6%.
Its president Sandeep Batra attributed the high profit growth to NII, and credited the strategy of risk calibrated growth followed by the bank under new leadership over the last two years for delivering higher income.
NIM was lower because of the excess liquidity in the system, as the bank was not able to deploy the higher deposits it got for loans, the management said, making it clear that it will now be more open to lending across segments as the economic activity normalises, but follow the same strategy.
Its overall provisions came at ₹2,995 crore as against the ₹2,506 crore in the year-ago period and the elevated ₹7,593 crore in the preceding quarter.
Mr. Batra said after setting aside over ₹8,700 crore, done majorly in the March and June quarters, for the possible impact of COVID-19, the bank now feels that the provisions made are sufficient to absorb the impact of the pandemic on asset quality.
He added that the bank has not utilized any of the excess provisions made for the pandemic. The overall tax expenses reduced by over two-thirds to ₹1,014 crore, which helped the bottom line.
The bank has received a few applications for restructuring from borrowers across segments, he said, adding that it is still early days as the window is open till December 31.
It said over ₹1,400 crore of loans could have slipped into non performing advances (NPAs) during the quarter, but for the Supreme Court mandate not to classify accounts up to August 31 as NPAs. However, the bank has made an extra provision of ₹497 crore on such advances.
The overall slippages came at ₹3,017 crore during the quarter with retail loans accounting for ₹1,700 crore. However, the bank management said the reverses are within the risk appetite and the lender is comfortable with its retail portfolio as well.
The quantum of low-rated advances, which are at the highest risk of slipping into NPA, came down by ₹1,000 crore to ₹16,000 crore during the quarter on upgrades and slippages from the book, Mr. Batra said.
The retail loans grew 6% and corporate advances grew 7% during the quarter while there was a sharp 32% decline in the overseas loan book. Unlike some of its peers, it is not observing stress in the unsecured assets book as much of its borrowers are salaried ones.
Mr. Batra said the overseas book, which used to be at over 12% of the overall loans two years ago, now accounts for 6.5% of the overall advances and will continue to decline as the bank focuses on domestic opportunities.
The bank is not tracking credit growth as a metric for growth but is rather focusing on the risk-calibrated approach, he said, adding that the objective is to provide consistent and predictable returns to shareholders.
It expects a normalisation in credit costs from the next fiscal onwards, wherein the money set aside for reverses in asset quality will be at 25% of the operating profit.
The bank’s overall capital adequacy increased to 18.47% on the back of a recent fund infusion and the management said it is not looking at any inorganic opportunities of growth.
The bank scrip had closed 1.84% down at ₹392.55 on the BSE on October 30, as against a 0.34% correction on the benchmark.
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