Net interest income grew by 26.8 percent year-on-year to Rs 7,737.43 crore for quarter ended June 2019, beating analyst expectations.
The country's largest private sector lender, ICICI Bank, posted a profit of Rs 1,908 crore in June quarter (Q1) over lower provisioning and healthy NII growth.
It was against a loss of Rs 119.55 crore reported in the year-ago period and a profit of Rs 969.06 crore in the previous quarter. The profit was partly impacted by lower other income.
Net interest income grew (NII) by 26.8 percent year-on-year to Rs 7,737.43 crore for quarter that ended on June 2019 with healthy loan growth of 15 percent YoY, which beat analyst expectations. NII was expected at Rs 7,427.1 crore, according to a poll of analysts conducted by CNBC-TV18.
The year-on-year growth in domestic advances was 18 percent at June 2019.
"We continued to leverage strong retail franchise, resulting in a 22 percent year-on-year growth in the retail loan portfolio in Q1. Excluding non-performing and restructured loans, the growth in domestic corporate loans was about 13 percent YoY," ICICI Bank said in its BSE filing.
Deposits increased by 21 percent year-on-year to Rs 6.6 lakh crore with average CASA deposits growth of 12.3 percent and term deposits growth of 34 percent YoY in Q1.
The net interest margin (NIM) remained strong at 3.61 percent in Q1FY20 as compared to 3.19 percent seen in the previous year, though there was a sequential contraction of 11bps.
The bank said that the impact of interest on income tax refund, and interest collection from NPLs on NIM was about 17 basis points in Q1FY20, as compared to about 25 basis points in Q4FY19.
"Numbers were quite strong on most counts, with NII pretty close to our estimates and even asset quality is strong," Ravikant Bhat of Indianivesh said in an interview to CNBC-TV18.
Asset quality in Q1 improved as per analysts' expectations. Gross non-performing assets, as a percentage of gross advances, declined 21bps sequentially to 6.49 percent and net NPAs, as a percentage of net advances fell 29bps QoQ to 1.77 percent for the quarter that ended on June 2019.
In fact, the hope of cleaning up bad loans and an improvement of its asset quality lifted the stock higher in the last few months. It gained 45 percent in last one year, and closed 1.6 percent higher on July 26.
The fund-based and non-fund based outstanding to borrowers rated BB and below (excluding non-performing assets) was Rs 15,355 crore in June 2019, far lower as compared to Rs 24,629 crore in the previous year, the bank said, adding that the recoveries and upgrades of non-performing loans were Rs 931 crore in Q1FY20.
Siddharth Purohit of SMC Institutional Equities also said the bank delivered better-than-expected numbers on all parameters. "We were expecting slow loan growth because of weak auto segment, but that was also ahead of estimates. So these are very impressive set of numbers from the bank."
He further said the retail loan book has grown, the bank is very well capitalised, and in fact growth should be a concern for the lender as it reflected in the numbers. Hence the stock looks very good, he said.
SMC has a buy call on the stock with a target of Rs 480. "We will probably upgrade our target given encouraging numbers in Q1," Purohit said.
Provisions dropped significantly to Rs 3,495.7 crore in Q1, down nearly 36 percent compared to previous quarter and lower by 41.5 percent year-on-year.
The provision coverage on non-performing loans, excluding cumulative technical write-offs, increased to 74 percent in the June quarter, up from 54.1 percent seen in the previous year.
"The provisioning coverage ratio increased to 74 percent, which is more comfort and one more check on the box of premium valuation. The bank has not stop growing in its loan book, when it is underway in terms of cleaning up of balance sheet," Market Expert, Prakash Diwan said.
"With the kind of premium given to HDFC Bank and non-corporate banks, ICICI Bank is also expected to come to that level in coming months as it is very well capitalised and should get valued at premium," he added.
Other income or non-interest income during the quarter fell by 11 percent year-on-year to Rs 3,425.4 crore due to lower treasury income.
Excluding treasury income of Rs 179 crore, other income grew by 5 percent to Rs 3,247 crore, the bank said, adding that few income, which is a part of other income, rose 10 percent YoY to Rs 3,039 crore in Q1.
Treasury income of Rs 766 crore for the June quarter that ended in 2018 had included gains worth Rs 1,110 crore from the sale of its shareholding in ICICI Prudential Life Insurance.
Operating profit increased 8.3 percent YoY to Rs 6,288.5 crore in Q1.
Core operating profit (profit before provisions and tax, excluding treasury income) grew by 21 percent YoY and the same excluding dividend income from subsidiaries increased by 25 percent YoY in Q1, ICICI Bank said.Its consolidated profit was Rs 2,514 crore in June quarter 2019, as compared to Rs 1,170 crore for the March quarter and Rs 5 crore seen in the June quarter of 2018.Get access to India's fastest growing financial subscriptions service Moneycontrol Pro for as little as Rs 599 for first year. Use the code "GETPRO". Moneycontrol Pro offers you all the information you need for wealth creation including actionable investment ideas, independent research and insights & analysis For more information, check out the Moneycontrol website or mobile app.