ICICI's Quarterly Profit Rises 12% to Record on Loan Growth

  • Bank to sell 9 percent stake in general insurance unit
  • Credit growth for the quarter driven by retail loans

ICICI Bank Ltd.’s second-quarter profit rose 12 percent to a record as India’s largest private sector lender by assets extended more loans.

Net income climbed to a record 30.3 billion rupees ($470 million) for the three months ended Sept. 30, from 27.1 billion rupees a year earlier, the Mumbai-based lender said in an exchange filing Friday. That was in line with the 30 billion-rupee mean of 30 analyst estimates compiled by Bloomberg. The lender will also sell a stake in its insurance unit.

Domestic retail loans at the lender grew by 25 percent, countering slower growth in corporate lending, a statement from the bank showed. A slower-than-expected economic revival and high borrowing costs are hindering Chief Executive Officer Chanda Kochhar’s efforts to boost the bank’s profit at a quicker pace.

“Retail loans are driving credit growth at the bank,” Karthikeyan P, a Chennai-based banking analyst at Cholamandalam Securities Ltd., said by phone. “Curtailing bad debt on a secular basis will help the bank to grow profits at a faster pace.”

ICICI’s gross nonperforming loans climbed nine basis points to 3.77 percent of total advances from June, the filing showed. While the ratio is the highest among the nation’s five largest private-sector banks, Kochhar said on a media call that bad-loan formation at the lender for the year to March 31 will be lower than the previous year.

Shares Rise

The bank’s shares rose 2 percent to 277 rupees at the close of trading in Mumbai, after falling 0.4 percent earlier. The stock slumped 22 percent this year, compared with the 10-member S&P BSE India Bankex index’s 7.9 percent drop.

ICICI’s board approved the sale of a 9 percent stake in ICICI Lombard General Insurance Co. to venture partner Fairfax Financial Holdings Ltd., the filing showed. The bank will raise 15.5 billion rupees from the proposed transaction, which is expected to be completed in the quarter ending March 31, Kochhar told reporters.

“The monetization of its stakes in its subsidiaries will be a positive kicker on earnings going ahead,” Cholamandalam’s Karthikeyan said.

ICICI’s outstanding loans increased 13 percent to 4.1 trillion rupees by September from a year earlier, the filing showed. Its net interest margin, a measure of lending profitability, widened to 3.52 percent from 3.42 percent a year earlier. Net interest income, or revenue from lending minus payments on deposits, rose 13 percent.

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