India’s ICICI Bank beats quarterly profit estimates on lower provisions for bad loans

MUMBAI: Indian private lender ICICI Bank reported a higher-than-expected profit for the second quarter on Saturday, as lower provisions against bad loans balanced out a fall in treasury income.

The country’s second-largest private lender by market capitalisation posted a standalone net profit of 123.59 billion Indian rupees ($1.40 billion) for the three months ended September, compared with 117.46 billion rupees a year earlier.

Analysts had expected a profit of 122.36 billion rupees, according to data compiled by LSEG.

Funds kept aside for potential bad loans and other losses fell 26% to 9.14 billion rupees, helping boost the bottom-line.

The bank’s other income, which includes income from treasury, rose a modest 5% as treasury income fell.

Treasury income for the quarter was at 2.2 billion rupees compared to 6.8 billion rupees in the corresponding quarter last year.

Bond yields rose sharply in the July-September quarter, hurting the bond portfolio of banks.

Net interest income rose 7.4% to 215.29 billion rupees, aided by a 10% rise in domestic loans. Small and mid-sized business loans grew the fastest even as growth in retail loans and large corporate loans remained subdued.

Deposits grew 7.7% during the quarter.

Indian lenders have seen a gradual pickup in credit demand over the last few months after several quarters of slowdown. Analysts expect the demand recovery to be more robust in the second half of the fiscal year, helped by recent tax cuts.

ICICI Bank’s net interest margin, a key measure of the bank’s profitability, was flat at 4.3%.

The Reserve Bank of India has cut its benchmark interest rate by a cumulative 100 basis points so far this year to spur consumption and investment amid a broader economic slowdown. But for banks, rate cuts tend to hurt in the short term.

Lenders typically pass on the benefit to borrowers quickly by cutting lending rates, while deposit rates adjust with a lag — squeezing their net interest margins in the interim.

The Mumbai-based lender’s asset quality improved with gross non-performing asset ratio at 1.58% at the end of September, compared with 1.67% in the three months earlier.