The second largest private sector lender ICICI Bank has reported a near 15% growth in net income in the third quarter ending December on robust interest income and treasury gains from bonds which doubled.
The bank management said in a conference call on Saturday that the key net interest income for the quarter rose 9.1% to ₹ 20,371 crore, boosting its net income by 14.8% even though the margin compressed to 4.25% from 4.43% a year earlier.
While the non-core income grew 16.3% to ₹6,180 crore led by fees from retail, rural and business banking customers, which contributed 78% of total fees, the biggest gain in the quarter was the more than doubling of the treasury gains at ₹371 crore compared to 123 crore a year ago.
Executive director Sandeep Batra attributed the spike to the gains from Government securities (G-sec) yields.
On the back of the aggressive push on digital banking, the bank saw revenue jumping nearly 23% to ₹10,194 crore, Batra told the reporters.
Provisions and contingencies, the funds set aside for potential bad loans, rose nearly 17% to ₹1,227 crore from ₹1,049 crore even though the bank’s asset quality was largely stable, with gross non-performing assets at 1.96% versus 1.97% earlier.
Batra said the country’s third largest bank will continue to grow its corporate book which increased to ₹2.81 trillion in the reporting quarter, compared to ₹2.48 trillion up 13.2%, according to the investor presentation.
“Our focus has always been to grow within our risk and return thresholds while considering all available opportunities for serving our customers in a 360 degree manner,” Batra said, adding the share of A- and above rated corporate portfolio stood at 75.9% compared to 78.5%; while the share of BBB+,BBB, BBB- rated borrowers, increased to 23.4% from 21.3%.
Retail growth slowest among other segments at around 10% and business was the fastest growing segment in the third quarter. The retail loan portfolio grew by 10.5% and business banking portfolio grew 31.9%. On the other hand, the rural portfolio grew 12.2%,
While gross NPAs were 1.96% of total assets compared to 1.97%, net NPAs were flat at 0.42% both annualized and sequential basis. The gross NPA additions were ₹6,085 crore compared to ₹5,916 crore in first quarter and ₹5,073 crore in second quarter.
The provisioning coverage ratio for non-performing loans stood at 78.2.
Net domestic advances increased 15.1% of which retail loans grew 10.5%, making up 52.4% of the total loan portfolio while deposit increased 14.1% to ₹15,20,309 crore and average deposits increased 13.7% to ₹14,58,489 crore.
Abhishek Pandya, a research analyst at StoxBox, expects some pressure on net interest margins due to interest rate cut anticipations on the horizon. “From a margin perspective, margin compression has moderated, and the pace of this compression has slowed, as indicated by management in their Q2 commentary," he said.
“However, with rate cuts on the horizon, we might see some pressure on NIMs. Fee income growth remains healthy. While other players are experiencing stress in asset quality, ICICI Bank has managed to maintain its asset quality, with NPA ratios stabilised," said Pandya.