ICICI Shares Surge on Record Profit as Bad-Debt Ratio Narrows

Updated on

ICICI Bank Ltd., India’s largest private sector lender by assets, rose in Mumbai stock trading after the lender posted a record quarterly profit amid faster loan growth and a narrower bad-debt ratio.

ICICI shares surged 5.2 percent, the most in three months, to 306 rupees at 1:18 p.m. local time after the lender reported a 12 percent climb in net income for the three months ended June 30. Profit of 29.8 billion rupees ($465 million), compared with the 29.2 billion-rupee median of 30 analyst estimates compiled by Bloomberg.

“ICICI shares surged post results as investors are cheering the sequential improvement in asset quality,” P Karthikeyan, a Chennai-based banking analyst at Cholamandalam Securities Ltd., said by phone. “While loan growth and asset quality improved from the previous quarter, there is skepticism regarding the sustainability of this.”

Chief Executive Officer Chanda Kochhar is trying to boost consumer lending and cut soured debt at a time when India’s banks are grappling with the highest bad-debt ratios in 13 years and the slowest loan growth since 1995. Forecasts for India’s economy to strengthen this year and next portend faster growth in ICICI’s earnings.

India’s economy is projected to expand 7.6 percent in the 12 months to March and 8 percent the following year, according to the median estimate of analysts surveyed by Bloomberg News.

More Loans

ICICI’s fiscal year that ended March 31 “was probably” the worst in terms of nonperforming assets, and loan growth will improve in the current year, Kochhar told reporters on a call in April. The lender posted the lowest quarterly profit growth in five years in the three months to March.

Its total outstanding loans increased 15 percent to 4 trillion rupees in June from a year earlier, exchange filings showed. Advances grew 14.4 percent in the March quarter.

The company’s net interest margin, a measure of lending profitability, widened to 3.54 percent from 3.4 percent a year earlier. Net interest income, or revenue from lending minus payments on deposits, rose 14 percent to 51.2 billion rupees.

The bank’s gross bad-loan ratio narrowed to 3.68 percent from 3.78 percent in the three months ended March 31. By comparison, HDFC Bank Ltd., India’s most valuable lender by market capitalization, had a ratio of 0.95 percent by the end of June.

ICICI’s capital-adequacy ratio stood at 16.37 percent, the filings showed, compared with a requirement of at least 9 percent under global Basel III rules.

The lender’s shares sank 13 percent this year, compared with a 0.3 percent gain by the S&P BSE India Bankex Index, which tracks 10 lenders.

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