ICICI Bank First-Quarter Profit Gains 30% as Bad Loans Drop

ICICI Bank Ltd., India’s second-largest lender, said first-quarter profit rose 30 percent after credit expanded at the fastest pace in almost four years and bad loans declined.

Net income increased to 13.3 billion rupees ($301 million), or 11.51 rupees a share, in the three months ended June 30, from 10.3 billion rupees, or 9.16 rupees, a year earlier, the Mumbai-based bank said in a statement to exchanges. That compares with the 13.7 billion rupee median of 28 estimates compiled by Bloomberg.

Chief Executive Officer Chanda Kochhar has delivered earnings growth for six straight quarters after the steepest increase in interest rates among major Asian economies failed to deter Indian companies from borrowing. ICICI’s reluctance to match the central bank’s move and raise its deposit rates also helped the lender boost profit.

The bank’s net interest income is “higher” than estimates, said Abhijit Majumder, an analyst at Prabhudas Lilladher Pvt. in Mumbai. “ICICI didn’t get into offering high deposit rates when other banks were doing so.”

ICICI Bank rose 1.9 percent to 1,036.75 rupees at the 3:30 p.m. close in Mumbai, making it the second-best performing stock in the MSCI India/Financials Index.

Credit Forecast

Kochhar today cut her forecast for credit growth three days after India’s central bank surprised all 22 economists surveyed by Bloomberg News with a half-point increase in the repurchase rate. She expects lending to expand 18 percent in the year to March 31, from her previous forecast of 20 percent

Provisions at ICICI increased 17 percent to 4.5 billion rupees, compared with 3.83 billion rupees in the March quarter. Non-performing loans dropped to 0.9 percent of total loans from 1.6 percent in the June quarter the previous year, the bank said.

“Provisions have moved up on a quarterly basis, after seven quarters of declines, which is a concern,” said Brian Hunsaker, an analyst at Keefe, Bruyette & Woods in Hong Kong. “There’s still a lot of downside risk to loan growth for Indian banks over the next year. Even the 18 percent estimate looks optimistic.”

India’s outstanding bank loans climbed 20 percent as of June 24 from a year earlier, according to data compiled by the central bank. Governor Duvvuri Subbarao on July 26 cut the projection for bank credit growth to 18 percent from 19 percent for the year ending in March 2012.

Treasury Income

Interest income rose 31 percent to 76 billion rupees in the quarter. The period’s figures include the full cost of operating expenses for its Bank of Rajasthan Ltd. acquisition, Kochhar said. The numbers also reflected the impact of an 11 percent salary increase to employees, Kochhar told reporters on a conference call.

ICICI Bank’s total outstanding loans increased 20 percent to 2.2 trillion rupees at the end of June. Deposits grew 18 percent to 668 billion rupees, the bank said in a statement.

ICICI Bank’s income from fees for distribution of mutual funds and investments rose 12 percent to 15.8 billion rupees, according to the statement. Treasury income, or income from trading in bonds and currencies, posted a loss of 250 million rupees, compared with a profit of 1 billion rupees in 2010.

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