ICICI Bank Ltd. (IBN) reported second-quarter fiscal 2015 results (ended Sep 30), before the opening bell on Thursday. Net profit for the company came in at INR27.09 billion ($439 million), up 15.2% from the year-ago quarter.
Results were facilitated by higher net interest and fee income, partly offset by mounting operating expenses. While capital ratios remained strong and loan and deposit balances increased, declining asset quality continued to be an unfavorable factor.
Performance in Detail
Net interest income grew 15.2% from the prior-year quarter to INR46.57 billion ($754 million).
Non-interest income rose 26.4% year over year to INR27.38 billion ($444 million). The reported quarter included INR1.65 billion ($26.7 million) of exchange-rate gains on repatriation of retained earnings from overseas branches.
Operating expenses totaled INR26.97 billion ($437 million), up 16.1% year over year. The increase was primarily due to expansion of the bank’s branch network. As a matter of fact, ICICI Bank has the largest branch network among private sector banks in India. As of Sep 30, 2014, the company had 3,815 branches and 11,739 ATMs.
Asset Quality
ICICI Bank’s credit quality continued to deteriorate. As of Sep 30, 2014, net nonperforming assets were INR39.97 billion ($649 million), up 47.8% from the prior-year quarter. Further, provisions increased 36% year over year to INR8.50 billion ($138 million).
Balance Sheet and Capital Ratios
As of Sep 30, 2014, ICICI Bank’s total advances amounted to INR3,617.57 billion ($58.7 billion), rising 13.8% year over year. The surge was mainly driven by robust growth in the retail segment, with a 25.2% year-over-year rise in total retail loan portfolio.
ICICI Bank’s savings account deposits rose 12.9% year over year to INR1,056.07 billion ($17.2 billion) while current account deposits grew 19.2% year over year to INR481.18 billion ($7.8 billion). Moreover, the current and savings account (CASA) ratio came in at 43.7% as of Sep 30, 2014.
In compliance with the Reserve Bank of India's guidelines on Basel III norms, ICICI Bank's capital adequacy was 17.41% and Tier-1 capital adequacy was 12.75% as of Sep 30, 2014. The figures were well above the minimum regulatory requirements.
Our Take
We expect ICICI bank to continue with its expansion in India and other overseas locations. Moreover, improved services will lead to an extensive client base, which in turn, will enhance the bank’s future growth.
However, escalating expenses along with rising provisions continue to keep us cautious. Also, the intensively competitive Indian market and skepticism surrounding the economic environment in India will likely keep the bank under pressure.
At present, ICICI Bank sports a Zacks Rank #4 (Sell).
Performance of Other Foreign Banks
Another Indian bank HDFC Bank Ltd. (HDB) reported second-quarter fiscal 2015 (ended Sep 30) net profit of INR23.81 billion ($0.39 billion), up 20.1% year over year. Improved results were due to higher net interest income and non-interest revenues, partly offset by elevated operating expenses.
Among other foreign banks Deutsche Bank AG (DB) reported net loss of €92 million ($122 million) in the third quarter of 2014, compared with an income of €51 million ($67.5 million) in the prior-year quarter. Lower provision for credit losses and higher revenues were more than offset by an increase in non-interest expenses.
UBS AG (UBS) reported third-quarter 2014 net income attributable to shareholders of CHF 762 million ($834.2 million), which compared favorably with the prior-year quarter earnings of CHF 577 million ($619.1 million). The results were driven by an elevated net interest income, and increased net fee and commission income.
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