ICICI Bank Q3 net profit surges 34% to Rs 8,312 crore, beats estimates

ICICI Bank’s net profit beat analysts’ estimates by a big margin

ICICI Bank Ltd reported a net profit of Rs 8,312 crore for the December quarter (Q3FY23), a 34.2 percent year-on-year increase helped by a healthy 21.4 percent growth in domestic loan book and stable net interest margin (NIM).

The bank’s net interest income (NII) rose 34.6 percent to Rs 16,465 crore from Rs 12,236 crore in the corresponding quarter last year.

The private sector lender’s net profit beat analysts’ estimates by a big margin. A Moneycontrol poll of seven brokerages had expected the lender’s net profit to be Rs. 7,994 crore for the quarter, a growth of 29 percent. NII was expected to have grown 28 percent year-on-year (YoY) to Rs 15,639 crore for the three months ended December.

Balance sheet growth

ICICI Bank’s domestic loan book grew a healthy 21.4 percent, driven mainly by loans to small businesses and retail. Business banking loans which are a credit to small informal businesses and rural businesses grew the fastest at 37.9 percent year-on-year, followed by 25 percent growth in loans to small and medium enterprises (SME) loans. To be sure, the growth in both these loan segments is higher partly owing to a low base. Retail loans grew by 23.4 percent while corporate loans grew by 18.3 percent.

The bank’s management sounded optimistic about loan growth in the coming quarters. Credit demand is seen across segments although the bank has turned conservative in assessing credit risk, the management said. “There is a lot happening in the overall economy. From our perspective, when we assess the corporate portfolio, it has to fall within our risk framework,” said Sandeep Batra, executive director at the bank in a press interaction post the release of the results.

“We are confident about our book. This is with keeping in mind the overall macro environment in growth and inflation. The objective is to strengthen the balance sheet,” he said.

This change in approach to risk has been reflected in the increase in provisions for the quarter. ICICI Bank’s provisions rose 12.5 percent to Rs 2,237 crore for the December quarter. The bank has a contingency provision of Rs 1,500 crore.

The bank reported a deposit growth rate of 10.3 percent, far slower than credit growth. Batra said that the bank has enough liquidity to continue with its loan book expansion. Low-cost current and savings accounts grew by 10.4 percent for the December quarter.

The bank reported an expansion in its net interest margin to 4.65 percent from 3.96 percent a year ago. Batra said that margins are expected to remain stable in the coming quarters.

Asset quality

ICICI Bank’s gross bad loans as a percentage of its loan book came down to 3.07 percent from 3.19 percent a year ago. However, fresh stress increased as slippage rose to Rs 1,119 crore from Rs 605 crore a year ago. The net NPA ratio declined to 0.55 percent from 0.85 percent a year ago and 0.61 percent in the previous quarter. The management indicated that upgrades and recoveries have increased, a sign of improvement. Recoveries and upgrades were Rs 4,604 crore compared with Rs 3,761 crore a year ago.