ICICI Third-Quarter Profit Jumps to Record, Beats Estimates

ICICI Bank Ltd. (ICICIBC), India’s second- largest lender by assets, posted a record profit for the third quarter, beating analysts’ estimates, as its bad-debt ratio narrowed and lending margins widened.

Net income climbed 30 percent to 22.5 billion rupees ($422 million), or 19.42 rupees a share, for the three months ended Dec. 31, from 17.3 billion rupees, or 14.96 rupees, a year earlier, the Mumbai-based lender said in an exchange filing today. That surpassed the 20.8 billion rupee median of analysts’ estimates compiled by Bloomberg.

The higher-than-estimated earnings may fuel Chief Executive Officer Chanda Kochhar’s efforts to boost retail lending as India’s central bank eases reserve requirements to spur demand for credit and bolster economic growth. ICICI is targeting a 20 percent expansion of its loan book for the year.

“ICICI is back on the growth track,” Vishal Narnolia, a Mumbai-based banking analyst at SMC Global Securities Ltd. (GLBS), said by phone. “ The improvement in margins and fall in bad loans will give more confidence to investors.”

Shares of ICICI dropped 1.8 percent to 1,191.15 rupees by the close of trading in Mumbai, while the BSE India Sensitive Index slid 0.6 percent.

Vendors sell goods outside an ICICI Bank Ltd. automated teller machine (ATM) branch in Jaipur, Rajasthan, India. Photograph: Sanjit Das/Bloomberg Close

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Vendors sell goods outside an ICICI Bank Ltd. automated teller machine (ATM) branch in Jaipur, Rajasthan, India. Photograph: Sanjit Das/Bloomberg

Net interest margin, a measure of lending profitability, widened 37 basis points to 3.07 percent from a year earlier, the bank said. A basis point is 0.01 percentage point.

Wider Margins

The bank plans to increase foreign-currency loans using funds raised from bond sales during the quarter to improve the net interest margins, Kochhar told reporters on a conference call after the earnings were announced.

The bank’s statutory liquidity holding is also “significantly higher” than the 23 percent required by the central bank, which gives the bank room to lend more and boost margins, she said.

ICICI’s net soured debt narrowed to 0.76 percent of the bank’s outstanding loans by the end of December, from 0.83 percent a year earlier, the filing shows.

The bank’s total outstanding loans increased by 16 percent from a year earlier to 2.87 trillion rupees at the end of December. Bank loans in India, excluding advances made to state agencies for food procurement, expanded 15.1 percent in the 12 months to Dec. 28, central bank data show.

To contact the reporter on this story: Anto Antony in Mumbai at aantony1@bloomberg.net

To contact the editor responsible for this story: Chitra Somayaji at csomayaji@bloomberg.net

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