ICICI Bank’s Net Income Jumps to Record on Lending as Provisions Decline By Anto Antony and Ruth David - Oct 31, 2011

ICICI Bank Ltd. (ICICIBC), India’s second- largest lender by assets, said second-quarter profit rose 22 percent to a record as loans increased and it reduced provisions for bad debt.

Net income climbed to 15.03 billion rupees ($309 million), or 13 rupees a share, for the three months ended Sept. 30, from 12.4 billion rupees, or 10.86 rupees, a year earlier, the Mumbai-based bank said in a statement to the Bombay Stock Exchange today. That compares with the 14.5 billion-rupee median estimate in a Bloomberg survey.

Chief Executive Officer Chanda Kochhar, 49, increased ICICI’s loans to companies and home and car buyers, while boosting fee income from distributing insurance and mutual-fund products. Shares of the bank posted their worst quarter in 2 1/2 years on concern that the steepest increases in borrowing costs among Asian economies may lead to defaults.

“The year-on-year fall in provisions shows the bank’s success in dealing with some of its legacy problems in retail lending and was a major driver” of profit growth, Brian Hunsaker, a banking analyst at Keefe Bruyette & Woods Inc., said by telephone from Hong Kong.

ICICI Bank’s net interest income, or the difference between revenue from loans and interest paid on deposits, rose 14 percent to 25.1 billion rupees in the quarter. The net interest margin, a measure of lending profitability, was 2.6 percent, unchanged from a year earlier.
Provisions Fall

Net new provisions fell to 3.18 billion rupees from 6.41 billion rupees a year earlier, ICICI said in the statement today. The provision coverage ratio expanded to 78.2 percent of non- performing loans from 69 percent as the ratio of net bad debt to total credits narrowed to 0.8 percent from 1.37 percent.

“The asset quality of the bank is expected to remain stable and no big increase in provisioning requirements is expected in the coming quarters,” Kochhar said.

The bank is keeping its credit growth target of 18 percent for the current financial year and expects interest margins to remain stable, Kochhar said.

ICICI shares fell 0.2 percent to 931.15 rupees in Mumbai today, compared with a 0.7 percent increase in the Bankex index, which tracks 14 Indian lenders. The stock lost 20 percent in the three months ended Sept. 30, its worst performance in 10 quarters.

ICICI Bank’s income from fees for distribution of mutual funds and investments rose 6.9 percent to 17 billion rupees, according to the statement.

The bank restructured 7.43 billion rupees of loans to microfinance institutions in the quarter. Net restructured loans on Sept. 30 stood at 25 billion rupees.

Deposits rose to 2.45 trillion rupees from 2.2 trillion rupees a year earlier. ICICI reported a capital adequacy ratio of 19 percent and a core capital ratio of 13 percent.

-- --With assistance from George Smith Alexander in Mumbai. Editors: Chitra Somayaji, Nathaniel Espino

To contact the reporters on this story: Ruth David in Mumbai at rdavid9@bloomberg.net; Anto Antony in New Delhi at aantony1@@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net
®2011 BLOOMBERG L.P. ALL RIGHTS RESERVED.