MUMBAI: ICICI Bank, India’s second- largest lender, said quarterly profit jumped 30 percent, beating analysts’ estimates as bad loans fell and lending rose.
Net income climbed to Rs19.6bn ($365m), or Rs16.9 a share, for the three months ended September 30, from Rs15bn, or Rs13, a year earlier, the Mumbai-based lender said in an exchange filing on Friday. That surpassed the Rs18.7bn median of analysts’ estimates compiled by Bloomberg.
Chief Executive Officer Chanda Kochhar aims to boost ICICI’s lending by about 20 percent this year, taking advantage of a cut in central bank reserve requirements last month. The Reserve Bank of India, in its effort to revive growth, may lower the amount of cash banks must hold again this month, according to a survey of economists, freeing up more funds for lending.
“The lender should see further improvement in margins in the second half, but it will be tough to grow the loan book at 20 percent as it projected last quarter,” said A S V Krishnan a senior research analyst at Ambit Capital in Mumbai. “While numbers are good, it remains to be seen what is recognized as bad loans and what is in the pipeline for restructuring.”
Central bank Governor Duvvuri Subbarao last month unexpectedly cut the cash reserve ratio for the country’s lenders to 4.5 percent from 4.75 percent, effective September 22, adding about Rs170bn to the banking system. India’s gross domestic product growth this year is forecast to weaken to a decade low of 4.9 percent, the International Monetary Fund said in its World Economic Outlook report.
ICICI’s total outstanding loans increased by 18 percent to Rs2.7 trillion at the end of September from Rs2.3 trillion a year earlier. The bank’s bad-loan ratio shrank to 0.78 percent from 0.93 percent a year earlier, it said. Net interest margin, a measure of lending profitability, widened to 3 percent during the quarter from 2.61 percent a year earlier. The bank is targeting to maintain margins of more than 3 percent this fiscal year with “no negative surprises in asset quality,” Kochhar said.
“The retail lending business for the bank will grow at a fast pace as the consumption demand in the Indian economy is strong,” she said. Net interest income, or revenue from lending minus payments on deposits, rose 35 percent to Rs33.7bn while non- interest income climbed 17 percent to Rs20.4bn.
WP-Bloomberg
