Int rates peaked; to see softening ahead: ICICI Bk

The bank's retail growth is about 30% YoY, but flat QoQ. They saw a slowdown on credit growth in the retail side in the industry. They expect retail to grow now at 25% due to the property price rise and the interest rate scenario.

Within retail, home loans growth has been lower, however, non-collateralised port side yields are attractive on risk ajusted basis. They see credit picking up on the corporate and international borrowing side.

The bank's net NPL is at 1.3%. The delinquencies on home loan side have been constant. Gross NPAs are at Rs 6,000 crore versus Rs 4,800 crore YoY. The system is flushed with liquidity at the moment and deposit rates have come down from March levels, though not sharply.

Though, interest rates seem to have peaked and will see some softening. The bank hasn't taken any decision on deposit rate cuts yet.

Mulye said that they have not heard from FIPB yet on ICICI Holdings. She sees credit growth picking up from Q2.

Excerpts from CNBC-TV18's exclusive interview with Vishakha Mulye:

Q: What are the net profit and net interest income numbers?

A: Our profit after tax, for the quarter, has grown by 25% on the back of an increase in the fee-based income of around 35% and the net interest income of around 17%.

Q: Can you give us the actual numbers for net interest income and net profit?

A: The net profit is Rs 775 crore, the net interest income is Rs 1,700 crore and the fee-based income is around Rs 1,400 crore.

Q: What has the company set aside in terms of provisions and contingencies, tax provisions and perhaps even operating expenses?

A: The operating expense growth is around 37% i.e. around Rs 1,400 crore. The total contingencies and provisions are around Rs 550 crore and the tax rate for the quarter is around 20%.

Q: Then would the worst problem in terms of provisions and contingencies be over - the kind of problem that you faced in the last quarter of the last year?

A: I do not think it was a problem, as in the last quarter there was a change in the guideline and we had to take a one-time impact of around Rs 330 crore. Excluding that, the provisions were in line with expectations and if you compare this quarter’s provision, they are again in line with Q4.

Q: The net interest income itself is a tad below expectation, although your overall profit has beaten the street expectations rather handsomely. The average we got from a poll of several analysts was 20% higher, you have come in with 25% growth in profit. What would you attribute this to?

A: The net interest income is the function of our yield and cost. In Q4, the cost had gone up and we could substantially pass on that cost to our customers. Also in Q1 of this year, there was a change in cash reserve ratio by the RBI, where it increased from 6% to 6.5% and there is no interest payable to the banks. That’s the reason it only increased by 17%, if you compare it with the last year’s first quarter.

Q: How much did you lose when the CRR went up by 0.5% on the existing deposits?

A: If you take the 0.5% impact and compare that with Q4, when the RBI paid us the one-time impact of entire interest that they had not paid us from November, the total impact in Q1, taking into consideration that one-time impact along with the non-payment of interest and the increase in CRR, was around Rs 135 crore.

Q: How have the net interest margins been?

A: The margins for this quarter are at around 2.3%. If you compare that with last year’s Q1 margins, which were at 2.5%,  they remain almost flat if one were to adjust it for the CRR increase and the interest on the CRR for last year.

Q: So this is the impact of CRR? Whatever cost of deposits went up, you have been able to pass on, it is only these niggling things which cannot be passed on?

A: That’s right. But, I would say substantially CRR, and a small portion of the lag effect that’s normally there because of the increase in the cost.

Q: How have deposits and advances grown and what is the percentage growth and the big numbers?

A: Our balance sheet size is approximately 3.56 trillion as on June 30. That’s a growth of around 35% YoY. On the advances side, our advances have grown by almost 35%, it is around 1.98 trillion now. The deposit growth has been in the region of around 26% and the big number is around 2.3 trillion. 

Q: How do you see the growth of the retail portion of your credit? Was there a slowdown as you have a credit growth of 47-50% in several quarters?

A: Compared to the retail portfolio and the June quarter, the retail growth has been in the region of 30%. However, if you compare it with the March quarter, then it is more or less flat, but this after taking into consideration Rs 4,000 crore of sell down in this quarter.

Q: How do you see things panning if not in numbers, at least, in terms of adjectives? Do you think you will be able to maintain this Q4 growth, that you have maintained in Q1 or do you think that the lag effect of rate hikes, which were compressed into four months, will continue to bite into the banking industry?

A: There is a slowdown in the industry on the credit, particularly on the retail side, because the retail credit, which has traditionally grown in the market at around 35-40%, is expected to grow at around 20-25%. That’s an impact of the high property prices, as well as the increase in the interest rates. Of course, there are some players in the market who have outperformed this market and there are some players who have been under that, so we will have to see that as we go forward.

Q: ICICI appears to have consciously chosen not to encourage its frenetic growth in the home loan market, whereas you were market leaders. In the previous quarter, you chose not to be the cheapest home loan rate giver. So do you think that you will continue with that position?

A: Our strategy always has been that whatever our interest rate, we have always passed it on to our customers. Now that the interest rate cycle has turned, naturally we have increased our interest rates. Of course, the demand is a function of the interest rate and other factors in the industry. So the loan is an impact of that strategy, which is what we have consistently followed. I wouldn’t say that it is conscious strategy on our part to discourage the asset growth, but it is a consistent strategy that we have followed over a period of time.

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