ICICI Bank, the private sector banking behemoth, posted lackluster 4QFY03 numbers. While the sequential topline growth is healthy at 8%, its bottomline growth is subdued at 2%. What is also noteworthy is the fact that in the March quarter there has been a tax writeback which has led to the bottomline growth. If it were not for the writeback, net profits would have fallen sequentially in the March quarter. The bank also announced its full year results. The year on year comparison is not possible since the bank has now been merged with its parent, ICICI.
Income from Operations
Net interest income
Operating Profit Margin (%)
Provisions and Contingencies
Profit before Tax
Profit after Tax/(Loss)
Net Profit Margin (%)
No. of Shares (m)
Diluted Earnings per share* (Rs)
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Interest income on advances has grown by 3% on a sequential basis in the March quarter. This seems to have been mainly due the bank's aggressive thrust in to the retail segment. ICICI Bank has cut interest rates aggressively on home loans in order to capture a larger chunk of the market. But what is noticeable about the March quarter is the growth seen in income from investments. The sequential growth from this segment stood at 9%, indicating that the bank is likely to have significantly increased its investments as higher income on current yields is less of a possibility. this could also mean that the bank is facing difficulty in growing its lending business apart form the retail sector.
Interest on advances
Income from investments
Interest on Balances
There has been an unusual growth in other income, further contributing to the 8% topline growth. Net interest income has therefore shown a robust 28% growth sequentially. This indicates that the bank seems to have managed to reduce its interest costs further. Interest costs fell last quarter too due to the thrust on the retail segment. The same seems to have been the condition in the March quarter too.
There has been a strong sequential increase in operating expenses of the bank. This is mainly due to the aggressive expansion spree that the bank is undertaking in order to expand its reach. Due to this expansion spree cost to income ratio (which indicates the efficiency of the bank) has suffered. for 4QFY03 this ratio stood at 67% compared to 57% in 3QFY03. For the full year the ratio stood at 44%.
While the bank's topline as well as net interest income performance has been encouraging, higher other expenses have dampened the effect on the bottomline. In fact if it we do not account for the provisioning writeback and tax write-back we would have seen a sequential decline in net profits for the March quarter. A fall in other income in the March quarter has further restricted the sequential growth in net profits of the bank.
At Rs 132 the stock is trading at a price to book ratio of 1.2x (not adjusted for NPAs). ICICI Bank has been growing at a blistering pace due to its retail initiatives and it has also done well to pare its exposure to corporate assets. Large amount of NPAs (4.9% of net customer assets) in the books could however restrict the earnings growth. Going forward investors may want to keep a tab on the bank's initiatives to reduce NPAs. Also, aggressive home loan disbursals by the bank should also be viewed cautiously.
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