ICICI Bank Posts Record Third-Quarter Profit on Retail Loans

ICICI Bank Ltd. signage displayed on a wall at the company's headquarters in the Bandra Kurla Complex in Mumbai. Photographer: Dhiraj Singh/Bloomberg

ICICI Bank Ltd., India’s second-largest lender by assets, posted a record profit for the third quarter as consumer lending climbed.

Net income rose 13 percent to 25.3 billion rupees ($405 million), or 21.85 rupees a share, for the three months ended Dec. 31, from 22.5 billion rupees, or 19.42 rupees, a year earlier, the Mumbai-based lender said in an exchange filing today. That compared with the 24.8 billion-rupee median of 39 analyst estimates compiled by Bloomberg.

Chief Executive Officer Chanda Kochhar aims to boost credit growth by focusing on retail lending as companies curtail borrowing amid the weakest pace of economic expansion in more than a decade. Kochhar has also reduced the lender’s cost of funding over the past four years by attracting more retail deposits and reducing dependence on bulk deposits.

“The bank is showing strong profit growth on the back of retail loans and treasury income,” Hatim Broachwala, the Mumbai-based banking analyst at Karvy Stock Broking Ltd., said by phone today. “With a low cost-to-income ratio and strong retail deposit accretion, the bank is well poised to benefit the most when the economy revives.”

Shares of ICICI fell 1.7% to 1,001.40 rupees. The stock slumped 3.5 percent in 2013, less than the 9.4 percent drop posted by the 12-stock S&P BSE Bankex index, as the lender reported lower bad-loan ratios and higher risk buffers than some of its government-controlled competitors.

Bad Loans

The bank’s gross bad-loan ratio shrank to 3.05 percent by the end of December, from 3.31 percent a year earlier, according to the statement.

Soured debt at Indian lenders had climbed to 4.2 percent of total loans as of Sept. 30, the highest in at least six years, data compiled by the central bank showed on Dec. 30. The ratio may widen to 4.6 percent by September 2014, the RBI said in a report last month.

Total outstanding loans at ICICI increased by 16 percent to 3.33 trillion rupees at the end of December while retail loans grew by 22 percent. Lending accounts for more than 60 percent of the bank’s revenue, with the rest coming from operations such as investments in government bonds and fees on processing loans.

Corporate Borrowing

“We have calibrated growth in loans to companies,” Kochhar said in a conference call with reporters after the earnings were announced. “Retail loans that are growing at a faster pace along with robust low cost retail deposit mobilization is helping the bank.”

ICICI is focusing on loans to individuals to grow profits as demand for debt from companies falls amid the slowdown in Asia’s third-largest economy. Consumer lending accounted for 36 percent of total credit and was the biggest part of its loan book as of Sept. 30, while corporate borrowing in India accounted for more than 32 percent, exchange filings showed.

The net interest margin, a measure of lending profitability, widened to 3.32 percent from 3.07 percent a year earlier. Net interest income, or revenue from lending minus payments on deposits, rose 22 percent to 42.6 billion rupees.

Profit growth at rival HDFC Bank Ltd. slowed to 25 percent, the weakest pace in at least 10 years, for the three-month period as income from loans slowed, according to exchange filings by the Mumbai-based bank on Jan. 17. The country’s most valuable lender by market capitalization won’t be able to revive profit growth until economic growth picks up pace, HDFC Bank’s Deputy Managing Director Paresh Sukthankar said in a media briefing at that time.

India’s gross domestic product will expand “a little below” 5 percent in the year through March 31, the central bank said Jan. 28. The $1.8 trillion-economy grew 5 percent in the year ended March, which was the slowest since 2003.

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