ICICI Bank Ltd beat expectations with a record quarterly profit on growing demand for credit in the country and rising fee income and forecast stronger loan growth in the next fiscal year.
ICICI Bank beat expectations with a record quarterly profit on growing demand for credit in the country and rising fee income and forecast stronger loan growth in the next fiscal year.
The country's No 2 lender said it is seeing an improvement in asset quality in an economy growing at 8.5%, the fastest pace among major Asian economies after China, after posting its strongest quarterly growth in three quarters.
But rising interest rates are a concern for the sector, which makes the bulk of its profit through pure banking activities.
"The sector is likely to see some margin pressure going forward as the impact of higher deposit rates in the last quarter start to have an impact," said Binay Chandgothia, chief investment officer at Principal Global Investors in Hong Kong.
Principal owns shares of the top three Indian banks including ICICI in its portfolio.
"The Reserve Bank of India will keep hiking rates in the short-term and that will slow down the nominal economic growth next year, impacting credit growth," Chandgothia said.
The Reserve Bank of India (RBI) is widely expected to raise key rates by 25 basis points on Tuesday to cool accelerating inflation. It would be the seventh increase in the past 12 months.
It had raised its main lending rate by 150 basis points in 2010.
Shares of ICICI ended up 1.7% at their highest close in nearly three weeks at Rs 1,083.90, after having risen as much as 2.4% earlier, in a Mumbai market that rose 0.7%.
Rival State Bank of India gained 3.7% after it beat quarterly profit forecasts on Saturday and forecast 20% to 22% loan growth in fiscal 2012 on increasing fee income and loan offtake.
ICICI Bank Chief Executive Chanda Kochhar said the bank expected "at least" 20% credit growth in 2011/12 compared with an expected 18% growth in the fiscal year ending on March 31.
"There is a healthy growth in credit demand in the sense it is very well diversified," she said, adding the bank was seeing strong loan demand from corporates as well as retail borrowers.
"The quality of profit is becoming healthier and healthier."
Net interest income, advances up
Net profit at ICICI Bank rose to a record Rs 14.4 crore (USD 316 million) in the quarter that ended on December 31 from Rs 11 crore a year earlier. Net interest income rose 12% to Rs 23.1 crore.
A Reuters poll of analysts had forecast net profit of Rs 13.5 crore on net interest income of Rs 22.9 crore.
ICICI Bank said on Monday its advances grew 15% to Rs 2.07 lakh crore (USD 45 billion) as of end-December.
Net interest margin, a key gauge of profitability, was at 2.6% in the quarter, little changed from a year ago, and Kochhar said that the bank would try to maintain the margins at the current levels for this fiscal.
The bank's net non performing asset ratio dropped to 1.16% as of end-December from 2.19% a year ago, as improved business and consumer sentiment resulted in fewer loan defaults.