ICICI BANK POSTS ROBUST Q3FY12 NUMBERS

On January 31, 2012, ICICI Bank posted robust Q3FY12 numbers. On the same day the management had arranged a conference call for the analyst community. We at DSIJ went through the bank’s performance for the quarter and also attended the conference call to know more about the management’s guidance. The scrip yesterday closed 5.87 per cent higher at Rs 902. However, today it has been witnessing some profit booking and closed 1.53 per cent lower at Rs 888.20.

In Q3FY12 the bank’s net interest income (NII) increased by 17 per cent to Rs 2,712 crore while the net profit increased by 20.25 per cent to Rs 1,728.1 crore on a YoY basis. The non-interest income of the bank grew marginally by 8 per cent to Rs 1,892 crore. This was on the back of slow growth in fee income and also on the part of the treasury segment which made a loss of Rs 65 crore against the profit of Rs 21 crore in a similar period last year. The treasury segment had marked to market (MTM) loss on the equity portfolio.

The bank holds the shares of GTL and Kingfisher Airlines which were under selling pressure during the last quarter. The bank had received a dividend income of Rs 150 crore from its insurance arm, ICICI Life, which helped the ‘other’ income performance to some extent. The management has guided that transaction banking and revenue remittances will have good growth going ahead.  

The net interest margin (NIM) of the bank increased by 7 basis points to 2.7 per cent and the management expects the NIM to come in at the same level for FY12. Its capital adequacy ratio (CAR) stood at a healthy 18.88 per cent with Tier 1 CAR coming in at 13.13 per cent. The asset quality of the bank improved further and the gross NPAs of the bank decreased by 93 basis points to 3.82 per cent while its net NPAs decreased by 56 basis points to 0.83 per cent.
  
As on December 31, 2011 the advances of the bank grew by 19 per cent to Rs 2,46,157 crore. It is good to see that the bank has seen a decent growth in advances against the moderation which is seen in the industry. The management outlook for its credit growth is 18 per cent for FY12 and in Q4FY12 it expects growth in retail asset and a rise in its working capital finance. On the other hand, the deposits of the bank increased by 19.67 per cent to Rs 2,60,589 crore. One should note that the bank has not deregulated its saving interest rate and despite this it showed an improvement in its CASA ratio which increased by 150 basis points to 43.6 per cent on a QoQ basis which is commendable. This was also due to infra bonds like NHAI.
 
The bank restructured loans of Rs 880 crore in the third quarter of FY12, primarily in terms of the corporate portfolio. With this, the total restructured loan stands at approximately Rs 3,070 crore, which is 1.24 per cent of the total loan book. In Q4FY12 loans of approximately Rs 1,300 crore will be restructured. The restructuring of GTL will be seen in the next quarter. We could see higher restructuring in Q4, thus resulting in higher provisioning affecting its profitability. However, one should not forget that the bank is maintaining adequate provision coverage ratio (PCR). As on December 31, 2011 its PCR stands at 78.9 per cent.

In Q3FY12 the retail segment of the bank performed well and its revenue from it increased by 25 per cent to Rs 4,951 crore while the segment reported profit of Rs 320 crore versus a loss of Rs 127 crore in the similar period last year. The profit from treasury took a beating on account of MTM losses which the bank suffered as it has exposure to companies like GTL and Kingfisher Airlines. We believe though that the bank has some issues on the restructuring front but will be able to manage them systematically. With good business growth, stable NIM, improving asset quality and good CAR, ICICI Bank makes for a good bet. We recommend investing in the scrip in a staggering manner for a longer horizon to garner better returns.