ICICI Bank Profit Exceeds Estimates on Wider Lending Margin

ICICI Bank Ltd., India’s second-largest lender by assets, posted first-quarter earnings that beat analysts’ estimates as lending operations became more profitable and bad loans shrank.

Net income climbed 36 percent to 18.2 billion rupees ($328 million), or 15.71 rupees a share, for the three months ended June 30, from 13.3 billion rupees, or 11.51 rupees, a year earlier, the Mumbai-based lender said in an exchange filing today. That surpassed the 17.4 billion-rupee median of analysts’ estimates compiled by Bloomberg.

The highest profit growth in five quarters will bolster Chief Executive Officer Chanda Kochhar’s efforts to expand credit by about 20 percent this year, exceeding the industry’s estimated 17 percent to 18 percent growth. ICICI, which has the highest capital buffer among India’s five largest banks, is also the best performer among those stocks, with a 35 percent rally this year.

“With good asset quality and net income growth, ICICI remains one of the top picks for investors among Indian banks,” said Nitin Kumar, a Mumbai-based analyst at Quant Broking Ltd. “Bad loans at the lender seem to be under control now.”

Shares of ICICI rose 2 percent to 925.15 rupees as of 2:45 p.m. in Mumbai trading today. The stock has surpassed the 9 percent gain in the benchmark BSE India Sensitive Index this year, as well as the 27 percent advance in the Bankex index, which tracks 14 lenders.

Margin Forecast

Net interest income, or revenue from lending minus payments on deposits, rose 32 percent to 31.9 billion rupees while non-interest income climbed 14 percent to 18.8 billion rupees. Domestic corporate loans climbed by 28 percent during the quarter, the bank said.

The net interest margin, a measure of lending profitability, widened to 3.01 percent during the quarter from 2.61 percent a year earlier. The bank will aim to keep the margin at more than 3 percent this year, Kochhar told reporters on a conference call today.

The net bad-loan ratio shrank to 0.61 percent from 0.91 percent a year earlier, ICICI said in the statement today.

ICICI recovered 4.3 billion rupees in loans made to Kingfisher Airlines Ltd., the cash-strapped Indian carrier controlled by billionaire Vijay Mallya, Jaspreet Kaur, a spokeswoman for the bank, said on July 2, without providing additional details. The airline has no remaining debt outstanding with the bank, she said.

Restructured Assets

The sale of those loans reduced the total restructured assets at ICICI, Kochhar told reporters today.

Indian corporate borrowers have sought to change the terms on more than 2 trillion rupees in souring debt as of March 31, doubling from 2009, according to the website of a corporate debt restructuring program managed by local lenders. The central bank has since recommended that banks need to more than double provisions for such loans to shield against defaults.

ICICI in April was placed under review for a downgrade of its financial strength rating by Moody’s Investors Service, which cited the lower sovereign-debt rating as a reason. The three-month review will take into account the cross-border diversification of operations and their domestic sovereign debt holdings, among other factors, Moody’s said at that time.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE