ICICI Bank's Earnings Climb - Analyst Blog

ICICI Bank Limited (IBN) reported 2011 fiscal first quarter (ended June 30) profit of INR10.26 billion (US$221 million), an increase of 16.9% year over year from INR8.78 billion (US$189 million).

 

Results in the reported quarter were primarily driven by an increase in fee income, lease and other income, a drop in loss provisions and reduced operating expenses. Asset quality showed signs of improvement while capital levels remained fixed.

 

 

ICICI Bank’s net interest income increased 0.3% year over year to INR19.91 billion (US$428.6 million).

 

Non-interest income fell 19.6% from the year-ago quarter to INR16.80 billion (US$374.2 million). The decline in non-interest income was due to a substantial decrease in treasury income, which plunged 85.4% year over year to INR1.04 billion (US$23.2 million). This decrease was partially offset by an increase in fee income, up 7% year over year to INR14.13 billion (US$304 million) and lease and other income, which more than doubled year over year to INR1.63 billion (US$36.3 million).

 

Though ICICI Bank’s loan book continued to grow, total deposits reported a decline in the quarter. Loan book climbed to INR1843.78 billion (US$39.7 billion) as of June 30, 2010 from INR1812.06 billion (US$39.0 billion) as of March 31, 2010. Total deposits declined to INR2009.13 billion (US$43.3 billion) as of June 30, 2010, compared with INR2020.17 billion (US$43.5 billion) as of March 31, 2010.

 

However, ICICI Bank has reported a growth in current and savings account (CASA) deposits and in CASA ratio. CASA deposits grew 32% year over year to INR846.18 billion (US$18.2 billion) as of June 30, 2010 compared with INR639.77 billion (US$ 13.8 billion) as of June 30, 2009. The CASA ratio rose to 42.1% as of June 30, 2010 from 30.4% as of June 30, 2009.

 

Operating expenses were well controlled and dropped 2% year over year to INR14.61 billion (US$315 million).

 

 

ICICI Bank witnessed an improvement in asset quality. Net nonperforming assets were down 25.0% year over year to INR35.14 billion (US$757 million) as of June 30, 2010. The company's net nonperforming asset ratio was 1.62%, down 57 basis points from the year-ago quarter. In addition, provision for losses plummeted 40% year over year to INR7.98 billion (US$172 million).

 

 

As of June 30, 2010, ICICI Bank's capital adequacy as per the Reserve Bank of India's Basel II norm was 20.2% and Tier-1 capital adequacy was 14.0%, well above the requirements of 9.0% and 6.0%, respectively.

 

 

We are concerned about ICICI Bank’s highly competitive operating environment. Nevertheless, we anticipate continued synergies from the company’s global syndication network, cost containment measures and operating efficiency.

 

ICICI Bank currently retains a Zacks #4 Rank, which translates into a short-term Sell rating, indicating slightly downward pressure on the shares over the near term. However, considering the fundamentals, we are maintaining our Neutral recommendation on the stock in the long term.