Country's largest private sector lender ICICI Bank on October 26 reported a 28 percent year-on-year (YoY) decline in its September quarter profit due to deferred tax assets adjustment (DTA), but overall earnings (except credit growth and increase in 'BB' and below rated book) were healthy with improvement in asset quality.
Profit after tax (PAT) dipped to Rs 654.96 crore in Q2FY20, against Rs 908.88 crore in the same period last year, but supported by strong PPoP and other income, and lower provisions.
"Excluding impact of one-time additional charge due to remeasurement of accumulated deferred tax, PAT would have been Rs 3,575 crore in Q2FY20, a growth of nearly four-fold compared to Rs 909 crore in Q2FY19," the bank said.
Net interest income (NII) during the quarter grew by 26 percent to Rs 8,057.43 crore with 13 percent credit growth YoY.
Domestic loan growth stood at 16 percent as the bank continued to leverage its strong retail franchise, resulting in a 22 percent YoY growth in the retail loan portfolio (which was 49.9 percent of the total portfolio) at September 2019, ICICI said.
Excluding non-performing and restructured loans, the growth in domestic corporate loans was about 7 percent YoY, it added.
Deposits growth was very strong at 25 percent YoY with average CASA deposits increasing by 11 percent YoY in Q2FY20 and term deposits rising 35 percent.
Net interest margin for the quarter came in at 3.64 percent, improving 3bps sequentially and 31bps YoY, the bank said.
Profit and loan growth missed analyst expectations, but NII was ahead of estimates. According to a poll of analysts conducted by CNBC-TV18, profit was estimated at Rs 975.6 crore and net interest income at Rs 7,734 crore with loan growth of 15 percent YoY.
"The bank surprised in many cases except credit growth that is fine considering the current environment and increase in BB-rated book a bit. We have to adjust estimates to the impact of the corporate tax rate cut," Krishnan ASV of SBICAP Securities told CNBC-TV18.
Asset quality of the bank improved as per street expectations with gross non-performing assets (NPA) as a percentage of gross advances falling 12bps sequentially to 6.37 percent in Q2FY20. Net NPAs as a percentage of net advances dropped QoQ 17bps to 1.6 percent during the quarter.
Gross slippages (or fresh addition of accounts in NPA list) dropped to Rs 2,482 crore for the quarter ended September 2019, down 11 percent sequentially and 20 percent YoY.
"Recoveries and upgrades of non-performing loans were Rs 1,263 crore in Q2FY20, which increased compared to Rs 931 crore in Q1FY20," the bank said.
But its fund-based and non-fund based outstanding to borrowers was rated BB and below (excluding non-performing assets) at Rs 16,074 crore in September 2019 increased compared to Rs 15,355 crore at the end of June 2019.
Provisions and contingencies fell considerably to Rs 2,506.87 crore at the end of September quarter 2019, down 28 percent QoQ and 37 percent YoY.
Other income or non-interest income increased 33 percent YoY to Rs 4,194.22 crore in the quarter ended September 2019 while pre-provision operating profit grew by 31 percent to Rs 6,874.1 crore YoY.
"Fee income grew by 16 percent YoY to Rs 3,478 crore in Q2FY20 and treasury segment reported a profit of Rs 341 crore during the quarter compared to a loss of Rs 35 crore in the corresponding period last fiscal," the lender said in a BSE filing.
Tax expenses jumped nearly 11-fold YoY to Rs 3,712.27 crore in Q2FY20, which included the one-time additional charge of Rs 2,920 crore due to re-measurement of accumulated deferred tax assets consequent to a reduction in marginal tax from 35 percent to 25 percent.
ICICI Bank shares on October 25 had closed at Rs 469.10, up 3.18 percent ahead of Q2 earnings.