ICICI Bank Posts Robust March Quarter Numbers

ICICI Bank, India’s second-largest private sector bank by market cap posted robust March quarter financial numbers. The scrip closed almost a per cent higher on Friday, and today it closed higher by almost 1.57 per cent at Rs 882.35. The consolidated net profit for the full financial year increased by 25 per cent to Rs 7,642 crore while for the March quarter its profit increased by 15 per cent to Rs 1,810 crore.

As on March 31, 2012 the advances of the bank grew by 17.3 per cent to Rs 2,53,728 crore while the deposits increased by 13.3 per cent to Rs 2,55,500 crore. Of the total loan book, around 36 per cent is given to the retail business segment, 23 per cent to domestic corporate, 27 per cent to overseas branches and around 9 per cent to the rural segment with the remaining 5 per cent to the SME segment. On the deposit front its CASA contribution came down by 160 basis points to 43.5 per cent.

For the March quarter its cost to income ratio decreased by 270 basis points to 41.6 per cent which further indicates that bank is working in an efficient manner. Usually, a lower ratio is good for a bank. The bank’s net interest margin (NIM) improved by 27 basis points to 3.01 per cent on a YoY basis. Further, at a time when there are concerns on the asset quality front for most of the banks, ICICI Bank has seen an improvement in their asset quality which is very commendable.

The gross NPAs decreased by 85 basis points to 3.62 per cent while they declined by 20 basis points on a sequential basis. The net NPAs of the bank also showed some kind of a similar trend as they declined by 38 basis points to 0.73 per cent on a YoY basis and by 10 basis points on a sequential basis. The provision coverage ratio (PCR) increased by 440 basis points to 80.4 per cent and this further indicates that going ahead the bank might not see much pressure on its asset quality front.

On the segmental front, for the March quarter, ICICI Group’s banking segment performed well when compared with its subsidiaries. The revenue from corporate banking increased by 35 per cent to Rs 7,384 crore while profit from the same increased by 20 per cent to Rs 1,750 crore. Its profit from the retail segment saw a major turnaround as it posted a profit of Rs 208 crore against loss of 52 crore in a similar period last year. However, the dismal performance of its subsidiaries in life insurance and general insurance dragged the overall performance of the bank to some extent.

Now Let us also look at the bank’s full year financial performance. The net interest income of the bank increased by 21 per cent to Rs 12,981 crore. The operating profit of the bank increased just by 10 per cent to Rs 12,092 crore. Lower provisioning during the year led the bank to post good bottomline growth for FY2012. The provisions of the bank decreased by 45 per cent to Rs 1,406 crore while its net profit grew by 25 per cent to Rs 7,642 crore.

The management, in its outlook and view for FY13, expects growth of 20 per cent in the domestic loan portfolio and expects the overseas loan book to remain flat or decline slightly in FY13. It aims to maintain average CASA ratio of around 40 per cent and expects NIM to improve by 10 to 15 basis points. Further, the management aims to manage the bank efficiently as it expects the cost to income ratio to remain at the current level of around 41 to 42 per cent.

Overall, we believe that the bank has posted a very good set of numbers. Also, the interest rate’s U-turn will benefit the bank going ahead. According to media reports, ICICI Bank has already slashed the base rate by 25 basis points and deposit rate in the range of 25 to 50 basis points depending on the horizon. Further, the bank is available at attractive valuation. Its price to earnings of FY12 is at 15.72 times and the price to book value of FY12 is at 1.68 times. We believe that with this robust financial performance coupled with good growth outlook for FY13, one can invest in the scrip keeping in mind a longer horizon.