Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.

Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
ICICI Bank: NPA concerns remain - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Jul 26, 2003

    ICICI Bank: NPA concerns remain

    ICICI Bank, the largest private sector bank in the country, has reported a strong improvement in its bottomline performance despite a fall in its topline for the June quarter. While bottomline has grown by 35% in 1QFY04, topline growth has been negative at 6%. Significant rise in other income and savings in interest expenses have helped the strong growth in bottomline.

    (Rs m) 1QFY03 1QFY04 Change
    Income from Operations 23,956 22,561 -5.8%
    Other Income 4,375 6,438 47.1%
    Interest Expenses 20,595 18,402 -10.6%
    Net interest income 3,361 4,159 23.7%
    Other Expenses 4,426 5,939 34.2%
    Operating Profit (1,065) (1,781) 67.2%
    Operating Profit Margin (%) -4.4% -7.9%  
    Provisions and Contingencies 495 850 71.9%
    Profit before Tax 2,816 3,808 35.2%
    Extra-ordinary income/(expense) - -  
    Tax 287 406 41.5%
    Profit after Tax/(Loss) 2,529 3,402 34.5%
    Net Profit Margin (%) 10.6% 15.1%  
    No. of Shares (m) 612.6 612.6  
    Diluted Earnings per share* (Rs) 16.5 22.2  
    P/E Ratio (x)   7.2  

    ICICI Bank's interest income from advances have shown a growth of 7% in the June quarter (we have assumed a 6% fall in topline for FY04 in our estimates). The bank has been very aggressive in the retail segment and this may be the reason for the growth in advances income. Retail assets have grown by 18% in the June quarter. They now make up nearly 35% of all advances by the bank. While income from advances has grown strongly, investment income has fallen significantly thus leading to a fall in its topline. This seems to be the result of the bank's efforts to lend aggressively, that has resulted in lower investments by the bank.

    While the topline performance is unimpiressive, what has impressed however is the fact that the bank has been able to further improve upon its Net Interest Margins (NIM) in the June quarter (from 1.2% to 1.7%). We have estimated a NIM of 1.7% in our FY04 estimates for the bank. This has been primarily achieved by repaying erstwhile ICICI's high interest borrowings as well as focusing on the retail segment for relatively cheaper capital in the form of deposits. Net interest income has risen by a healthy 24% due to the above mentioned initiatives.

    Operating expenses of the bank have shown a sharp rise in the June quarter. This may have been due to ICICI Bank's continuing initiative to increase its reach by setting up new branches and ATMs. Operating margins have also fallen due to this reason.

    Despite fall in topline, the bank has been able to improve its bottomline performance significantly in part due to strong rise in other income. ICICI Bank's other income has risen mainly on account of booking of profits in its G-Sec as well as equities portfolio. Bottomline growth has been strong despite strong rise in provisioning. However despite the rise in provisioning, net NPA to advances ratio still stands at 4.9%, same as that for FY03, and one of the highest in the industry. This indicates that the bank may be facing increased delinquencies in its loan portfolio. High NPA levels continue to be a concern for the bank. We have arrived at a net NPA to advances ratio of 3.5% for the bank in FY04.

    At Rs 160, the stock is trading at a P/E ratio of 7x its annualised 1QFY04 earnings. ICICI Bank's performance in the June quarter indicates that it is doing well enough on its restructuring initiatives post the merger with its parent. However NPAs continue to be the only area which is not being tackled effectively by the bank. While the stock has run up in the recent past on expectations of good results, non performance on the NPA front could dampen investor spirits (regarding the stock) going forward.



    Equitymaster requests your view! Post a comment on "ICICI Bank: NPA concerns remain". Click here!


    More Views on News

    ICICI Bank: Loan Slippages Trending Downwards (Quarterly Results Update - Detailed)

    Aug 10, 2017

    Asset quality will be the key thing to watch out for going forward.

    ICICI Bank: Provision Costs Up 5 Fold In First Half of FY17 (Quarterly Results Update - Detailed)

    Nov 18, 2016

    ICICI Bank declared the results for the second quarter of financial year ending March 2017 (2QFY17). The bank reported a flattish net interest income while net profits grew by 2.4%YoY in 2QFY17.

    IDFC Bank: Strong Trading Income Shields Credit Slowdown (Quarterly Results Update - Detailed)

    Aug 10, 2017

    IDFC Bank is taking steps to address contracting NIMs and successfully transition in to a retail bank.

    Axis Bank: Outside Watchlist Slippages a Big Worry (Quarterly Results Update - Detailed)

    Jul 31, 2017

    Almost 74% of the watchlist as provided by the bank of Rs 226 billion in FY16 has turned into non-performing assets.

    HDFC Bank: Asset Quality Deteriorates due to Farm Loan Waiver (Quarterly Results Update - Detailed)

    Jul 25, 2017

    Asset quality was under pressure on account of farm loan waivers. Despite the higher provisioning, the company reported a healthy profit growth of 20%.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms


    Aug 18, 2017 (Close)


    • Track your investment in ICICI BANK with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks


    Compare Company With Charts