ICICI Bank PBT soars 187% in Q3 on growth in interest, other income

ICICI Bank reported a 187.32 per cent jump in its profit before tax (PBT) at Rs 5,465 crore in the third quarter of the financial year 2019-20 (Q3FY20), helped by substantial growth in interest and other income, lower provisions and the resolution of Essar Steel.

The private sector lender had posted PBT of Rs 1,902 crore in Q3FY19.

Net profit rose 158 per cent to Rs 4,146 crore in the quarter, from Rs 1,605 crore in Q3FY19. The net interest income of the lender saw an uptick of 24.29 per cent at Rs 8,545 crore in Q3FY20 compared to Rs 6,875 crore in Q3FY19.

The net interest margin stood at 3.77 per cent in Q3FY20 compared to 3.64 per cent in the quarter ended September 30, 2019 (Q2FY20) and 3.40 per cent in Q3FY19. Non-interest income, excluding treasury income, was Rs 4,043 crore, up from Rs 3,404 crore in Q3FY9.

The gross non-performing assets (GNPA) of the bank saw an improvement at 5.95 per cent, compared to 7.75 per cent during Q3FY19 and 6.37 per cent in Q2FY20. Fresh addition to NPAs stood at Rs 4,363 crore at the end of December 2019 as against Rs 2,482 crore in the previous quarter.

Recoveries, upgrades and other deletions, excluding write-offs, from NPAs were Rs 4,088 crore in the quarter.

The provisions (excluding taxes) declined 51 per cent year-on-year (YoY) to Rs 2,083 crore in Q3FY20 from Rs 4,244 crore in Q3FY19.

chartThe provision coverage ratio on NPAs, including cumulative technical write-offs, was 85.7 per cent, compared to 76.3 per cent at December 31, 2018, the bank said in a release.

Bank executives, in a conference call with the media, said they have classified their exposure to a certain broking company as NPA and made full provisions for it. They have also categorised restructured loans to a South-based industrial company as NPA.

Moreover, the fund-based and non-fund based outstanding to borrowers rated BB and below (excluding NPAs) was Rs 17,403 crore compared to Rs 17,525 crore at the end of March 2019 and Rs 16,074 crore at the end of September 2019.

There has also been a slight uptick in NPAs in the retail segment owing mostly to adverse effect of farm loan waiver scheme on the Kisan Credit Card portfolio.

Its total advances increased 13 per cent YoY to Rs 635,654 crore at the end of December 31, 2019.

The lender saw a 16 per cent YoY growth in its domestic advances. The retail loan portfolio of the bank registered a 19 per cent growth while the domestic corporate book saw a 12 per cent rise.

Total deposits increased 18 per cent YoY to Rs 7,16,345 crore. It also saw 15 per cent growth in average current and savings account (CASA) deposits, while the average CASA ratio stood at 42.8 per cent.

The capital adequacy ratio was at 16.50 per cent and Tier-1 capital adequacy ratio stood at 14.98 per cent on a standalone basis at the end of December 31, 2019.

ICICI Bank Q3 net profit rises over two-fold to Rs 4,146 crore

Private sector lender ICICI Bank on Saturday reported an over two-fold jump in standalone net profit at Rs 4,146.46 crore for the third quarter ended December 2019.

It had registered a net profit of Rs 1,604.91 crore in the October-December period a year ago, ICICI Bank said in a BSE filing.

Total income rose 17.23 per cent to Rs 23,638.26 crore during the quarter under review as compared to Rs 20,163.25 crore in the corresponding period a year ago.

The bank's asset quality improved with gross non-performing assets (NPAs) falling to 5.95 per cent of gross loans at December-end 2019, compared to 7.75 per cent a year ago.

"The net interest margin was 3.77 per cent in Q3, FY2020 compared to 3.64 per cent in the quarter ended September 30, 2018 (Q2, FY2020) and 3.40 per cent in Q3, FY2019," ICICI Bank said in a statement.

Net NPAs stood at 1.49 per cent of total advances as against 2.58 per cent as on December 2018.

"Provisions (excluding taxes) declined by 51 per cent year-on-year to Rs 2,083 crore in Q3 FY2020 from Rs 4,244 crore in Q3 FY2019," it said. In absolute term, gross bad loans of the lender stood at Rs 43 453.86 crore as on December 31, 2019 as compared to Rs 51 591.47 crore a year ago Net bad loans were valued at Rs 10,388.50 crore as against Rs 16,252.44 crore in the same quarter of the previous fiscal.

On consolidated basis, the net profit was at Rs 4,670.10 crore during the quarter ended December 2019, against Rs 1,874.33 crore in the corresponding quarter a year earlier.

Income, on consolidated basis, was at Rs 38,370.95 crore during the quarter ended December 2018-19 from Rs 33,433.31 crore in the year-ago period.

Treasury income grew by 11 per cent year-on-year to Rs 531 crore in quarter under review from Rs 479 crore in the third quarter a year ago, it said.

Net interest margin was 3.77 per cent in the third quarter.

ICICI Bank said the recoveries, upgrades and other deletions, excluding write-offs were at Rs 4,088 crore in Q3, FY2020.

ICICI Bank stock at 52-week high; may double price in 2 yrs: Morgan Stanley

The ICICI Bank stock on Thursday hit its 52-week high of Rs 518.60 apiece on the BSE after global brokerage firm Morgan Stanley said in a report that India's second largest private lender can double its share price in the next couple of years.

Morgan Stanley on Wednesday took an 'overweight' view on the ICICI stock, which in market parlance signifies that a particular stock will outperform others in its sector or in the market.

"The stock has done well over the last 18 months, but at nearly 7.5 times FY21E core PPoP, valuation is still at a deep discount to private peers - and recent policy moves should provide a significant boost to multiples," Morgan Stanley said.

"Our new one-year target price is Rs 775 (about 55 per cent upside) and in two years the stock could be worth Rs 1,000 (about 100 per cent upside). We also raise our ADR target price to $21.50," the report added.

Among the factors that analysts say are working in favour of the bank is its improving asset quality, progress in loan growth, net interest margin (NIM) and insurance premium growth are the key value drivers for ICICI Bank.

Instead, a severe slowdown in the economy, slower-than-expected loan growth recovery and major volatility on news flow around the bank's top management are the key negatives.

ICICI Bank last month had reported a 27.94 per cent decline in its standalone net profit for the second quarter of 2019-20, due to higher tax expenses. The bank's net profit in the second quarter declined to Rs 655 crore from Rs 909 crore in the year-ago quarter.

The lender's tax expense during the quarter under review rose to Rs 3,712 crore from Rs 347 crore reported for the corresponding quarter of last fiscal, on the back of one-time additional charge of Rs 2,920 crore due to re-measurement of accumulated deferred tax assets consequent to a reduction in marginal tax from 35 per cent to 25 per cent.

ICICI Bank's Q2 pre-tax profit jumps 247% to Rs 4,367 crore in FY20

Private sector lender ICICI Bank on Saturday reported a jump of 247 per cent in its profit before tax (PBT) for the July-September 2019 quarter (Q2), posting Rs 4,367 crore, compared to Rs 1,256 crore in the year-ago quarter. However, net profit dipped by 27.9 per cent to Rs 655 crore in Q2FY20, as against Rs 909 crore in the corresponding quarter of FY19.

Excluding the impact of a one-time additional charge of Rs 2,920 crore on account of the re-measurement of the accumulated deferred tax (DTA), net profit would have been Rs 3,575 crore on a standalone basis, the bank said in a statement.

The bank’s net interest margin (NIM) improved to 3.64 per cent in Q2FY20 from 3.33 per cent a year ago. Net interest income (NII) increased by 26 per cent to Rs 8,057 crore from Rs 6,418 crore in the year-ago quarter.

Deposits grew by 25 per cent to Rs 6.96 trillion at the end of September 2019 from Rs 5.59 trillion a year ago. The low-cost current account savings account (CASA) deposits grew at 14.6 per cent and term deposits by 34.9 per cent on a YoY basis. The share of CASA deposits in the total deposit pool was 46.7 per cent in September 2019, as against 45.2 per cent in June 2019 and 50.8 per cent in September 2018.

Commenting on the slow CASA growth, the management said, “CASA is seeing lower growth across the industry as people are preferring more fixed deposits. Term deposits are growing strongly, but we are committed to push CASA.”

Its total advances increased by 13 per cent year-on-year to Rs 6.13 trillion at end of September 2019 from Rs 5.44 trillion at the end of September 2018. The domestic loan growth at 16 per cent YoY was driven by retail.

Retail loans grew by 22 per cent YoY, while SME loan book grew by 29.9 per cent.

The bank’s asset quality improved with the Gross NPA ratio decreasing from 8.54 per cent in Q2FY19 to 6.37 per cent at end of Q2FY20. The net non-performing asset (NPA) ratio decreased from 3.65 per cent in September 2018 to 1.6 per cent in September 2019. Provisions (excluding taxes) declined by 37 per cent to Rs 2,507 crore in Q2FY20 from Rs 3,994 crore in Q2FY19.

The bank’s exposure to weak accounts — BB and below-rated corporates — inched up a bit to Rs 16,074 crore in September 2019 (Q2FY20) from Rs 15,355 crore in June 2019 (Q1FY20).

In a concall with analysts, the bank management said, “The addition in the slippages from the BB and below-rated corporates will be higher than the earlier quarter trends.”

The bank also said slippages from the retail loan book had increased because the size of the book had increased and it was proportionate. Commenting on the telecom sector, the management said, “The total exposure to the sector is only 1.8 per cent of the loan book and it is with the top two players.”

Siddharth Purohit, a banking analyst at SMC Global Securities, said “The numbers are very good and clearly beat street expectations. Loan growth is a little low, but the slippages numbers look good and provisions were also better than expected. Loan growth needs to pick up or else it will impact the NIMs.”

ICICI Bank back in the black in Q1 with net profit of Rs 1,908 crore

Private sector lender ICICI Bank on Saturday reported a net profit of Rs 1,908.03 crore for the April-June quarter (Q1FY20), aided by good interest income and lower provisioning, against a loss of Rs 120 crore in the year-ago quarter. Analysts were expecting a profit of little more than Rs 2,000 crore for the first quarter.

The bank, however, showed improvement in asset quality, as its gross non-performing assets (NPA) ratio fell -- both year-on-year and sequentially -- and the gross additions to NPAs were lower than the year-ago quarter.

The gross NPA ratio was 6.49 per cent for the June quarter, compared to 8.81 per cent in the year-ago period and 6.70 per cent in the March quarter.

The net NPA ratio decreased to 1.77 per cent at the end of June 30 this year, which is the “lowest in 14 quarters”, said the bank’s executive director, Sandeep Batra, in a conference call with the media. In the year-ago quarter, the net NPA ratio was 4.19 per cent.

The bank’s management did not offer any guidance on slippages, or even credit and deposit growth, but said rather than chasing a growth target, the bank would be focusing on choosing customers that pass through their “filters”.

“As of now, we are stable (in terms of asset quality). We have our risk filters which are pretty tight. We continue to recalibrate the segments that we are not comfortable with. Whatever we are writing, we are quite comfortable with that,” said Batra.

“We are not targeting a number, but as long as the customer passes the risk filter, we are happy to grow our loan book,” said Rakesh Jha, group CFO.

ICICI Bank back in the black in Q1 with net profit of Rs 1,908 crore “We do expect a credit cost within tolerable level and our overall outlook on credit cost is stable. We continue to monitor these credit qualities across our portfolios,” Jha said.

The bank’s net interest income (NII) increased by 27 per cent year-on-year to Rs 7,737 crore in the first quarter. NII in the current quarter includes Rs 184 crore of interest on income-tax refund, compared to Rs 8 crore in the year-ago quarter, and Rs 414 crore in the March quarter, the bank said in a statement.

Core operating profit (profit before provisions and tax, excluding treasury income) increased by 21 per cent year-on-year to Rs 6,110 crore from Rs 5,042 crore a year ago.

Net interest margin, or the difference between the yields on advances and cost of deposits, was 3.61 per cent compared to 3.19 per cent in the year-ago quarter and 3.72 per cent in the March quarter. Non-interest income, excluding treasury income, was Rs 3,247 crore compared to Rs 3,085 crore in Q1FY19. Also, fee income grew 10 per cent to Rs 3,039 crore.

“Retail fees constituted 72 per cent of total fees,” the bank said. Treasury income in the quarter was Rs 179 crore compared to Rs 766 crore in the year-ago period. However, last year’s treasury income included a gain of Rs 1,110 crore on sale of shareholding in ICICI Prudential Life Insurance.

Provisions for the quarter were Rs 3,496 crore compared to Rs 5,971 crore in the year-ago period.

The bank’s domestic loan book grew 18 per cent year-on-year, while total loan growth was 15 per cent. The CASA ratio was 45.2 per cent as of June 30, 2019, compared to 49.6 per cent on March 31, 2019, and 50.5 per cent on June 30, 2018.

Recoveries and upgrades of non-performing loans were Rs 931 crore in the first quarter. “At June 30, 2019, the fund-based and non-fund based outstanding to borrowers rated BB and below (excluding nonperforming assets) was Rs 15,355 crore ($2.2 billion) compared to Rs 24,629 crore ($3.6 billion) at June 30, 2018,” the bank said. These BB rated loans don’t necessarily mean they are due to slip into NPAs, the management clarified. “It doesn’t mean that the entire book will slip into NPA. Any bank, at any point, will have BB assets,” said Batra.

According to the management, the share of unsecured credit loans in the total loans is 8 per cent, and the BB-rated loans constitute 3.5 per cent of the total loans.

On a consolidated basis, profit after tax was Rs 2,514 crore in the first quarter, against Rs 1,170 crore in the fourth quarter and Rs 5 crore in the year-ago quarter. The bank said it was not planning to raise any capital, and that it was well capitalised.

The bank said it would continue to lend to good quality. The bank did not buy much securitised assets from NBFCs in the June quarter, and will buy those assets only if the retail loans pass the bank’s set ‘criteria’.

The bank sold about Rs 200 crore of loans to asset reconstruction companies on a cash basis in the quarter, the management said.

ICICI Bank swings into black in first quarter on higher retail loan growth

ICICI Bank Ltd, India’s second-largest private lender, reported a quarterly profit on Saturday compared with a loss a year earlier, helped by lower provisions and higher retail loan growth.

Net profit for the fiscal first quarter ended June 30 was Rs 190.8 crore ($277.04 million), compared with a loss of Rs 120 crore in the same period a year ago, the bank said in a statement.

But the profit fell slightly short of the average forecast of Rs 208.7 crore from 19 analysts, according to Refinitiv data.

ICICI, like its peers, also said India’s ongoing economic slowdown weighed on its performance in the quarter.

“From an economic scenario there is a bit of a slowdown in consumption as well as in auto sales,” said Sandeep Batra, Executive Director of ICICI Bank in a conference call after the results. “However, the services sector continues to do well and we are seeing an improvement in the capital expenditure cycle.”

The bank’s corporate loan book grew at a pace of 13 per cent in the quarter, while its retail loan book grew 22 per cent in the period.

ICICI, which has been under pressure lately due to rising bad loans, said net non-performing assets (NPA) at the end of the June quarter were down 51 per cent to $1.17 billion. The net NPA was at a 14-quarter low of 1.77 per cent, said the bank’s management.

Quarterly provisions fell to $507 million from $865 million a year ago.

Net interest margin, a key indicator of the bank’s profitability, was 3.61 per cent in the quarter, compared with 3.19 per cent in the year-ago quarter.

The total capital adequacy ratio of the bank was 16.19 per cent and it does not have any immediate plans to raise capital, said Batra.

Earlier in the week, ICICI’s peer Kotak Mahindra Bank Ltd also reported a profit that fell marginally shy of estimates, and joined the country’s largest private lender HDFC Bank in warning of the slowing pace of domestic growth.

The warnings from the private lenders in Asia’s third largest economy, which have been dealing with a large pile of stressed loans, have spooked investors.

ICICI Bank Q1 preview: Loan growth, lower provisions to aid PAT growth

ICICI Bank is scheduled to announce its April-June quarter earnings for financial year 2019-20 (Q1FY20) on Saturday, July 27. Analysts expect the private lender to report net profit of over Rs 1,000 crore. Asset quality, especially in the power sector, and trends in loan restructuring would be keenly watched.

Analysts at Sharekhan expect the bank to report a profit after tax (PAT) of Rs 1,377 crore as against a loss of Rs 120 crore in the June quarter of the previous fiscal (Q1FY19). The bank reported a profit of Rs 42.1 crore in the quarter ended March, 2019 (Q4FY19).

“Moderation in credit costs, stable fee income and an improved treasury performance could aid ICICI Bank’s profitability,” say analysts at Motilal Oswal Financial Services (MOFS), who peg the bank’s net profit at Rs 2,123.5 crore.

At the bourses, the bank’s stock has outperformed the benchmark index thus far in calendar year 2019 (CY19), and gained 13 per cent YTD as against a 5 per cent and 7.5 per cent rise in the S&P BSE Sensex and the BSE Bankex, respectively.

NET INTEREST INCOME

For the recently concluded quarter, the net interest income (NII) is expected to inch up 26 per cent year-on-year (YoY) to Rs 7,689.1 crore. Accordingly, net interest margin (NIM) is pegged at around 3.62 per cent, up 43 basis points (bps) YoY, from 3.19 per cent in Q1FY19. ICICI Bank had reported a NII of Rs 6,101.9 crore in Q1FY19 and Rs 7,620.1 crore in Q4FY19.

“Loan growth will be better than industry, led by domestic and retail growth, while NIMs could likely be lower QoQ on one of IT refund impact. Core NIMs, however, should be steady,” analysts at Prabhudas Lilladher wrote in an earnings preview note. They peg the bank’s credit book at Rs 59.13-lakh crore, up 14.5 per cent from the corresponding quarter of the previous fiscal.

SLIPPAGES AND PROVISIONS

Reduced stressed assets and better provision coverage ratio (PCR) is likely to push the gross and net non-performing ratios to lower levels. Prabhudas Lilladher expects the bank to create provisions of Rs 4,656.8 crore, down 22 per cent YoY, from Rs 5,808.4 crore reported in the June quarter of the last financial year.

Slippages are expected to stabilise and be largely from existing stress pool. That said, movement of ‘BB’ and below-rated loans and commentary on power assets would be watched by analysts. Outlook on asset quality and trend on further relapse from restructured loans, would also be on their radar.

“Gross slippages are expected to moderate to 2.5 per cent due to a reduction in corporate slippages. Net stress loans (including BB and below rated accounts) as on Q4FY19 stood at 5.9 per cent of loans and are expected to decline further as incremental stress addition moderates,” said analysts at Motilal Oswal.

Overall, analysts expect the GNPA ratio to drop up to 6.61 per cent, down from 8.8 per cent reported in June quarter of FY19. The NNPA ratio is pegged at 2.3 per cent, down 1.9 percentage points from 4.2 per cent in Q1FY19. The ratio, however, is higher sequentially from 2.1 per cent in Q4FY19. The GNPA is pegged at Rs 45,640 crore.

ICICI-Videocon case: ED grills Chanda Kochhar, husband and Venugopal Dhoot

The ED Friday questioned former ICICI Bank CEO Chanda Kochhar, her husband Deepak Kochhar and Videocon promoter Venugopal Dhoot in connection with a money laundering case involving their business concern, officials said.

The three deposed as part of a regular summon and their statement is being being recorded under the Prevention of Money Laundering Act (PMLA), they said.

They have been grilled by the central agency in the past in connection with the alleged corruption case involving the bank and Videocon group.

The Enforcement Directorate (ED) had last month questioned and recorded the statements of Chanda Kochhar and Deepak Kochhar over multiple sessions at its office in Delhi.

The agency is also preparing to analyse the details of assets of the Kochhars and others so that they can be provisionally attached under the anti-money laundering law.

Chanda Kochhar's brother-in-law Rajiv Kochhar has also been grilled by the ED multiple times in the case.

The Kochhar couple and Dhoot were questioned at the ED's zonal office in Mumbai after the central agency conducted raids on March 1.

The searches were conducted at the premises of Chanda Kochhar, her family and Dhoot in Maharashtra's Mumbai and Aurangabad cities.

The ED registered a criminal case under the PMLA earlier this year against Chanda Kochhar, Deepak Kochhar, Dhoot and others to probe alleged irregularities and corrupt practices in sanctioning Rs 1,875-crore of loans by ICICI Bank to the corporate group.

This action of the agency was based on an FIR registered by the Central Bureau of Investigation.

The CBI has named all the three and Dhoot's companies -- Videocon International Electronics Ltd (VIEL) and Videocon Industries Limited (VIL) -- in its case.

The anti-corruption probe agency also named Supreme Energy, a company founded by Dhoot, and NuPower Renewables, a company controlled by Deepak Kochhar, in the FIR.

The CBI alleged that Dhoot had invested in Nupower through his firm Supreme Energy in a quid pro quo to loans cleared by ICICI Bank after Chanda Kochhar took over as the bank's CEO on May 1, 2009.

The ownership of Nupower and Supreme Energy changed hands through a complex web of shared transactions between Deepak Kochhar and Dhoot, the CBI alleged.

During its preliminary enquiry, the CBI found that six loans worth Rs 1,875 crore were sanctioned to the Videocon Group and companies associated with it between June 2009 and October 2011 in alleged violation of laid-down policies of ICICI Bank, which have now become part of the probe.

The loans were declared non-performing assets in 2012, causing a loss ofRs 1,730 crore to the bank, it alleged.

The ED, sources said, is also probing at least two other instances of loans given by the ICICI Bank (during Chanda Kochhar's tenure) to Gujarat-based pharmaceutical firm Sterling Biotech and to Bhushan Steel group, both of which are under its probe for alleged money laundering charges.

Fitch downgrades ICICI Bank rating from BBB- to BB+ amid banking distress

Global rating agency Fitch said Monday it has downgraded ICICI Bank by a notch as financial health of the private sector banks has weakened.

The rating action comes amid the challenges the bank faces in its operating environment, Fitch Ratings said in a statement.

"Fitch Ratings has downgraded ICICI Bank Limited's Long-Term Issuer Default Rating (IDR) to 'BB+' from 'BBB-' and its Viability Rating to 'bb+' from 'bbb-'. The Outlook on the IDR is Stable," it said.

It has also affirmed ICICI's Support Rating at '3' and Support Rating Floor at 'BB+', it said.

BB rating indicates speculative grade while BBB points at good credit quality.

Fitch lowered its midpoint for India's operating environment to 'bb+' from 'bbb-' following a review of the banking sector's performance, particularly in the last three years, and its regulatory framework, as well as the outlook in the near term.

"We also compared India with other sovereign jurisdictions in Asia rated in the 'BBB' category including the key metrics of GDP per capita and the ease-of-doing-business ranking," it said.

It concluded the sector will perform below the average of its peers over the next one to two years in spite of our expectations of high economic growth and improving business prospects in India.

The performance of Indian banks should have largely bottomed out, but the sector is still struggling with poor asset quality and weak core capitalisation, it said.

"We estimate that Indian banks' impaired-loan ratio declined to an average of 10.8 per cent by 9 months of 2019-20 from 11.5 per cent in the financial year ended March 2018 (FY18), which continues to be high by global standards," it said.

Capital buffers are assessed by Fitch as moderate, including for private-sector banks, especially in light of their high impaired-loan ratio, risk appetite and the challenging but competitive operating environment, it said.

Fitch further said ICICI Bank's core capitalisation is higher than that of most other Indian banks but within the current operating environment poses only a moderate buffer against risks.

That said, Fitch believes the bank has some capital fungibility through the sale of stakes in profitable subsidiaries and the repatriation of excess capital from foreign subsidiaries.

Its impaired-loan ratio is weaker than that of other large private banks and most banks with Viability Ratings in the 'bb' category, even though the measure has improved slightly to 7.5 per cent in 2019-20 from 10 per cent in the previous fiscal, it added.