ICICI Bank Quarter Profit Up 44% on Rising Company Loans

ICICI Bank Ltd., India’s second-largest lender, said fourth-quarter profit jumped 44 percent to a record as lending to domestic companies climbed and the bank set aside less money to cover bad debts.

Net income rose to 14.5 billion rupees ($327 million), or 12.55 rupees a share, in the three months ended March 31, from 10.1 billion rupees, or 8.98 rupees, a year earlier, the Mumbai-based bank said today in an e-mailed statement. That compares with the 14.8 billion rupee average of 27 analysts’ estimates compiled by Bloomberg. The shares climbed 0.5 percent to 1,112.15 rupees at the 3:30 p.m. close in Mumbai.

“These are good results overall,” said Deepak Ramineedi, an analyst at Credit Suisse AG in Mumbai. The bank’s margins were better than what analysts had estimated and the provisioning was in line with forecasts, Ramineedi said.

Chief Executive Officer Chanda Kochhar reiterated a target of expanding credit by 20 percent this year, even as funding costs rise after the Reserve Bank of India raised rates for the eighth time in a year to curb inflation. Wholesale prices last month climbed 8.98 percent in an economy forecast by the government to expand as much as 9.25 percent this year.

“I am building in the fact that interest rates are on an upward bias,” Kochhar told reporters today.

The bank’s board recommended a dividend of 14 rupees a share in today’s results, from 12 rupees last year.

Bad Loans

Money set aside for bad loans will continue to decline this year, Kochhar said. Provisions fell to 3.83 billion rupees from 9.9 billion rupees in the same quarter last year, according to the statement. The coverage ratio climbed to 76 percent as of March 31, from 71.8 percent on Dec. 31. The Reserve Bank this month relaxed provisioning rules.

Shares of ICICI Bank dropped 2.5 percent last quarter, making it the third-worst performer among 14 lenders tracked by the Bankex index.

Profit at the lender’s U.K. unit was $37 million, deputy chief financial officer Rakesh Jha told reporters today. ICICI Bank reported the same numbers for March 2010. At its Canadian subsidiary, profit was C$33 million, compared with C$35.4 million in the same period last year.

Curb Credit

The lender may curb credit to Indian companies from its U.K. and Canadian units as regulators seek to curtail risks tied to funds collected in those nations, Chief Financial Officer N.S. Kannan said in an interview on April 16.

A tightening of the rules may make it tougher for ICICI Bank to tap demand from Indian clients for overseas loans and curtail Kochhar’s ability to expand foreign operations.

ICICI Prudential Asset Management Company’s profit fell to 720 million rupees, from 1.28 billion rupees a year earlier. ICICI Lombard General Insurance Company reported a loss of 800 million rupees after providing 2.72 billion rupees to meet regulatory guidelines.

ICICI Bank’s total outstanding loans increased for the third consecutive quarter to 2.2 trillion rupees at the end of March from 1.81 trillion rupees a year earlier. The lender’s non-performing asset ratio narrowed to 0.94 percent from 1.87 percent, according to the statement.

ICICI Bank has resumed growth in retail lending but the numbers are still small, Kochhar said today. Loans to domestic companies rose by over 35 percent in the quarter, she said.

Growth in India’s bank loans, excluding advances made to state agencies for food procurement, climbed 22 percent as of April 8 from a year earlier, the central bank said April 22.

ICICI Bank’s income from fees for distribution of mutual funds and investments fell to 16.4 billion rupees from 18.9 billion rupees a year ago, according to the statement. Treasury income, or income from trading in bonds and currencies, saw a loss of 1.96 billion rupees from a profit of 1.96 billion rupees in the same quarter last year.

“I don’t expect ICICI Bank to grow at higher rates than the sector,” said Vijay Sarathi, an analyst at BNP Paribas in Mumbai. The key factors this year are what industries ICICI Bank will lend to and their overseas business growth, he said.

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