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ICICI Bank: Higher provisions hit bottomline - Views on News from Equitymaster
 
 
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  • Oct 19, 2000

    ICICI Bank: Higher provisions hit bottomline

    ICICI Bank's profits for the 2QFY01 increased by 26% with a remarkable growth of 52% in operating income. The bank's continuous efforts to reshuffle the composition of deposits has resulted in sharp improvement in operating margins to 33.4% (17.7% in 2QFY00). Increasing retail initiatives has resulted in the lower cost of deposits. The bank's interest spread has also moved up to 2.7% during 1HFY01 (2.3% as on FY00).

    (Rs m) 2QFY00 2QFY01 Change
    Operating Income 1,887 2,873 52.3%
    Other Income 317 341 7.6%
    Interest Expenses 1,553 1,914 23.3%
    Operating Profit (EBDIT) 334 960 187.3%
    Operating Profit Margin (%) 17.7% 33.4%  
    Other expenses 223 630 183.0%
    Depreciation 50 86 72.8%
    Profit before Tax 379 585 54.5%
    Other provisions 26 224 769.4%
    Tax 115 61 -47.3%
    Profit after Tax/(Loss) 239 301 26.0%
    Net profit margin (%) 12.6% 10.5%  
    Diluted number of shares 196.8 196.8  
    Diluted Earnings per share* 4.8 6.1  
    *(annualised) 264 525 98.6%

    The bank's deposits and customers assets registered a year on year growth of 48% and 85% respectively during the 1HFY01. Its retail deposits now contribute 48% of total deposits compared to 31% as on March 2000.

    The bank's retail focus has enabled it to see an astounding growth of 95% in retail customers. Its saving bank accounts have gone up to 573,000 from 292,000 at March 2000. Also the bank has the largest number of Internet banking customers and ATMs (311) in the country. Being a part of ICICI group it has the seamless opportunity of cross selling group products to corporates and retail segments.

    The net NPA ratio of the bank increased marginally to 1.33% from 1.2% during 1QFY01 and capital adequacy ratio stood at 17.6%. If one were to exclude the other provisions the bank's net profits have actually doubled in the current quarter.

    At the current market price of Rs 139, ICICI Bank is trading at 23 times its 2QFY01 annualised earnings. Its Price/Book value ratio of 2 times compares well with other private sector banks. However compared to HDFC Bank its valuations are lower due to concern over quality of its assets. The valuations are likely to improve in the future keeping in mind the bank's initiative to reduce its NPA ratio. Further the bank's emphasis on technology and retail thrust will help it in maintaining fantastic growth in future.

     

     

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