Recording its slowest profit growth in the last four years, ICICI Bank, the country’s largest private sector bank, has posted a 13 per cent rise in net profit to Rs 2,532 crore for the quarter ended December 2013. On a consolidated basis, the net profit rose 9 per cent to Rs 2,872 crore, with both its insurance subsidiaries reporting good numbers. The net interest margin, a measure of lending profitability, widened to 3.32 per cent from 3.07 per cent a year earlier. Net interest income, or revenue from lending minus payments on deposits, rose 22 per cent to Rs 4,255 crore. ICICI Bank MD and CEO Chanda Kochhar said the bank will be able to sustain the net interest margin at the current levels. Profit growth was restrained by an additional provision of Rs 215 crore toward deferred tax liabilities on special reserves for the nine-months ending December. Kochhar said, henceforth, the bank will set aside up to Rs 70 crore every quarter for the tax liabilities, in accordance with RBI norms. During the quarter, the bank added Rs 1,230 crore to its gross non-performing assets (NPAs). Net advances to companies with restructured loans increased by Rs 1,776 crore to Rs 8,602 crore. “Given the challenging operating environment, we continue to see additions to non-performing assets and restructured assets in the next two quarters,” Kochhar said in a conference call with reporters after the results were announced. “We have calibrated growth in loans to companies,” Kochhar said. “Retail loans that are growing at a faster pace along with robust low cost retail deposit mobilisation are helping the bank.” Profit growth at HDFC Bank, the second largest private bank, slowed to 25 per cent, the weakest pace in at least 10 years. ICICI Bank has a recast loan pipeline of Rs 3,000 crore, she said. The stress on assets is not sector specific but group or company specific and emanating across sectors. It was able to maintain the cost-to-income ratio at 37 per cent and is targeting to keep it under 40 per cent, Kochhar said. Rakesh Tarway, VP and head of Equity Strategy, Motilal Oswal Securities, said, “the bank reported NII growth in line with expectations but other income was much better than expectations, which led to modest growth in the net profit. Continuity of top management, lower asset quality issues, adequate capitalisation, strengthening liability franchise and low hanging fruits and its ability to capture market share from state-owned banks due to superior service will keep valuation of ICICI Bank intact.” ICICI Bank shares declined 1.69 per cent to Rs 1,001.95 on the BSE. The bank posted a 16 per cent increase in advances during the quarter, driven by a 22 per cent surge in retail borrowing, which pushed the contribution of smaller loans in the book to 37 per cent as against 35 per cent last year. It posted a 35 per cent jump in auto loans and a 23 per cent increase in mortgages.
