ICICI Bank's 4 bps NIM growth in tough times surprising
The expectation on the street was that ICICI Bank will deliver a stable-to-marginal decline in its margins while a hope of an improvement was seen as far-fetched.
November 07, 2013 / 10:17 IST
ICICI Bank posted one of the strongest performances in the banking space in this quarter. In what is expected to be one of the toughest quarters for financials due to higher cost of funds, the 4 bps sequential improvement in its net interest margins (NIMs) to 3.31percent took the street by complete surprise.
The expectation was that ICICI will deliver a stable-to-marginal decline in its margins with improvement being at the far end of hope. More so because the bank has guided for a 20 bps year-on-year improvement in its NIMs in FY14 because they see the current levels of NIMs to sustain. In FY13, the bank had clocked a NIM of 3.11 percent.The other standout feature this quarter was asset quality. The gross net performing asset or GNPA was flat on an absolute basis while the net non performing asset or NNPA ratio rose marginally 0.85 percent vs 0.82 percent QoQ. While slippages came in close to Q1 levels at Rs 1000 crore (Rs 1116 crore in Q1), it was in line with the street expectations of Rs 800-1000 crore. Restructured loans at Rs 1076 crore versus Rs 839 crore was slightly higher QoQ as well.The NII posted was strong as well with a growth of 20 percent and PAT beating street with a growth of 20 percent versus estimates of an 11 percent growth. Additionally, ICICI posted these numbers despite absorbing an MTM loss of Rs 280 crore in the quarter on its investments.The only negative possibly was that the NNPA fell to 73.1 percent vs 75.4 percent QoQ, That positives have outweighed the negatives is evident from the optimism showered by the analyst community. For example, Motilal Oswal in its post results note maintained its BUY on the stock citing that the growth in NII was strong and PAT was ahead of estimates. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
