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ICICI Bank: Loan Slippages Trending Downwards - Views on News from Equitymaster
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ICICI Bank: Loan Slippages Trending Downwards
Aug 10, 2017

ICICI Bank declared the results for the first quarter of the financial year ended March 2018 (1QFY18). The bank has reported an 8.4% YoY growth in net interest income while net profits declined 8.2% YoY in 1QFY18. Here is our analysis of the results.

Performance summary
  • Net interest income grows 8.4% YoY during 1QFY18 on the back of 11% YoY growth in domestic advances.
  • Net interest margins (NIM) declined marginally by 0.1% as compared to a year ago and stood at 3.27%. The NIMs could come under pressure going forward as the company shifts its focus on lending to higher rated corporates, wherein the yields are a tad lower.
  • Net profits declined by 8.2% YoY in 1QFY18 on account of an increase in provisions coupled with an increase in operating expenses. The cost to income ratio which stood at 39.2% in 1QFY17 has now increased to 42.2% in 1QFY18.
  • The gross non-performing asset (GNPA) stood at 7.99% during the quarter.
  • Capital adequacy ratio (CAR) stood at 17.5% at the end of June 2017 as per Basel III norms.

    Rs (m) 1QFY17 1QFY18 Change
    Interest income 133,303 134,591 1.0%
    Interest expense 81,717 78,693 -3.7%
    Net Interest Income 51,585 55,898 8.4%
    Net interest margin (%) 3.8% 3.6%  
    Other Income 34,293 33,879 -1.2%
    Other Expense 33,731 37,944 12.5%
    Provisions and contingencies 25,145 26,087 3.7%
    Profit before tax 27,002 25,746 -4.7%
    Tax 4,679 5,256 12.3%
    Profit after tax/ (loss) 22,323 20,490 -8.2%
    Net profit margin (%) 16.7% 15.2%  
    No. of shares (m)*   6,412.8  
    Book value per share (Rs)   156.9  
    P/BV (x)*   1.7  

    *Book value as on 30th June 2017

  • The growth in the advances was led by retail and small & medium enterprise (SME). Retail loan advances grew by 18.6% in the first quarter of FY18. Beneath the retail loan advances, personal loans and credit cards grew by 40% and 37% respectively.
  • With branch network of over 4,852 the bank has undoubtedly leveraged its franchise well and capitalized on CASA deposits. CASA deposits improved to 49% of overall deposits at the end of June 2017 as compared to 45.1% a year ago.

    Increasing Share of CASA in Deposit Mix
    (Rs m) 1QFY17 % of total 1QFY18 % of total Change
    Advances 4,494,270   4,640,750   3.3%
    Retail 2,085,341 46.4% 2,473,520 53.3% 18.6%
    Corporate 2,408,929 53.6% 2,167,230 46.7% -10.0%
    Deposits 4,240,860   4,862,540   14.7%
    CASA 1,912,628 45.1% 2,382,645 49.0% 24.6%
    Term deposits 2,328,232 54.9% 2,479,895 51.0% 6.5%
    Credit deposit ratio 106.0%   95.4%    

  • The gross non-performing asset as a percentage to overall advances increased marginally by 0.1% to 7.99% as compared to the previous quarter. Gross additions to the NPAs were the lowest among seven quarters at Rs 49.76 billion. 48% of the gross additions to NPAs were from the wholesale and SME business. Balance slippages largely represents one account in electronics and engineering sector.
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