ICICI Bank Posts 17% Increase in First-Quarter Net Income to $222 Million

ICICI Bank Ltd., India’s second- biggest lender, said first-quarter profit rose 17 percent, as it cut provisions and increased fee income.

Net income advanced to 10.3 billion rupees ($222 million), or 9.16 rupees a share, in the three months ended June 30, from 8.78 billion rupees, or 7.87 rupees a share, a year earlier, the Mumbai-based bank said today. Profit matched the 10.3 billion rupee average of 18 analyst estimates compiled by Bloomberg.

The second consecutive quarter of profit growth may bolster Chief Executive Officer Chanda Kochhar’s efforts to tap accelerating credit demand in an economy that is forecast to grow by 8.5 percent in the year to March 31. Still, loans shrank for the seventh consecutive quarter as Kochhar pared dependence on unsecured lending such as credit cards and personal loans.

“The results were a mixed bag,” said Clyton Fernandes, an analyst at Anand Rathi Financial Services Ltd. in Mumbai. “While the profit number was in line with expectations, what is disappointing is that the bank’s balance sheet hasn’t seen any growth. Markets could be disappointed with these results.”

ICICI, which was the worst performing stock last quarter on the 14-member Bankex index, fell 2.6 percent to 904.90 rupees in Mumbai trading yesterday. The shares have added 3.2 percent this year, trailing the benchmark lenders’ gauge’s 15 percent gain.

Loans, Deposits Decline

The bank’s total outstanding loans dropped to 1.84 trillion rupees at the end of June, from 1.98 trillion rupees a year earlier, ICICI said in a statement. Deposits shrank to 2 trillion rupees, from 2.1 trillion rupees.

ICICI will increase rates for deposits from today generally by 25 basis points, with rates on some deposits likely raised by as much as 75 basis points, Kochhar said on a call with reporters. The bank will keep reviewing lending rates, she said.

Fee income gained 7 percent in the quarter to 14.1 billion rupees, while net non-performing assets declined 25 percent to 35.1 billion rupees, the bank said. Treasury income, or income from trading in bonds and currencies, fell to 1.04 billion rupees, from 7.14 billion rupees.

The Reserve Bank of India this week raised interest rates for the fourth time since mid-March, the most by any central bank in Asia, to quell the fastest inflation in the Group of 20 nations.

The central bank also raised its forecast for economic growth as strengthening domestic demand trumps concern that the global economy will slow amid Europe’s debt crisis and elevated U.S. unemployment. Growth in India’s $1.2 trillion economy may accelerate to 8.5 percent, faster than the previous estimate of 8 percent, for the year ending March, the bank said.

Loan Growth Outlook

ICICI expects total loan growth of 15 percent this year and domestic loan growth of 20 percent, Kochhar said.

“It’s going to come from both retail and corporate,” she said. “We are looking at housing loans, car loans, project loans and working capital loans.”

The bank cut its non-performing asset ratio to 1.62 percent, from 2.19 percent a year earlier. The provisioning coverage ratio widened to 64.8 percent as of June 30, from 51.1 percent in the year-earlier period. The Reserve Bank in October asked banks to increase the minimum provision ratio for non- performing assets, or NPAs, to 70 percent from 10 percent by September 2010. ICICI received an extension until March 2011.

ICICI’s net interest income, or the difference between revenue from loans and interest paid on deposits, was little changed at 19.9 billion rupees, the bank said.

To contact the reporters on this story: Madelene Pearson in Mumbai on mpearson1@bloomberg.net; Ruth David in Mumbai at rdavid9@bloomberg.net.

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