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ICICI Bank: Provision Costs Up 5 Fold In First Half of FY17 - Views on News from Equitymaster
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  • Nov 18, 2016 - ICICI Bank: Provision Costs Up 5 Fold In First Half of FY17

ICICI Bank: Provision Costs Up 5 Fold In First Half of FY17
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.

Performance summary
  • Net interest income grows by 0.4% in 1HFY17 on the back of 10.9% YoY growth in advances while net interest margin (NIM) declined to 3.2%.
  • Cost to income ratio comes down from 37.7% in 1HFY16 to 31.0% in 1HFY17. Largely driven by gains in the other income from the sale of ICICI Prudential Life Insurance stake.
  • Capital adequacy ratio stood at 16.7% at the end of September 2016 with tier 1 at 13.2%.
  • Net NPAs rise to 3.2% of advances while the Gross NPAs rose to 6.1% of advances in 1HFY17.
  • Net profits declined by 11% YoY in 1HFY17 largely due to a rise in provisioning.

    Rs (m) 2QFY16 2QFY17 Change 1HFY16 1HFY17 Change
    Interest income 130,989 136,394 4.1% 259,114 269,697 4.1%
    Interest Expense 78,474 83,861 6.9% 155,449 165,578 6.5%
    Net Interest Income 52,515 52,533 0.0% 103,666 104,118 0.4%
    NIM (%) 3.5% 3.1% 3.5% 3.2%
    Other Income 30,074 91,197 203.2% 59,972 125,489 109.2%
    Other Expense 31,004 37,369 20.5% 61,676 71,100 15.3%
    Provisions and contingencies 9,422 70,827 651.8% 18,976 95,972 405.8%
    Profit before tax 42,163 35,534 -15.7% 82,987 62,536 -24.6%
    Tax 11,862 4,511 -62.0% 22,924 9,190 -59.9%
    Profit after tax / (loss) 30,301 31,023 2.4% 60,063 53,346 -11.2%
    Net profit margin (%) 23.1% 22.7% 23.2% 19.8%
    No. of shares (m) 5,820.1
    Book value per share (Rs)* 163.3
    P/BV (x) 1.6
    * (Standalone book value as on 30th September 2016)
  • In the half year ended period of September 2016, Deposits grew at a faster pace than the advances. Low costs deposits grew by 18.3% YoY.
  • The bank continued to witness deterioration in its loan book quality. About 80% of the gross additions to the NPAs for the wholesale and the SME businesses in 2QFY17 were on account of slippages relating to companies which were internally rated below investment grade or were restructured.

    1HFY16 % of total 1HFY17 % of total Change
    Advances 4,096,927 4,542,555 10.9%
    Retail 1,802,648 44.0% 2,175,884 47.9% 20.7%
    Corporate 1,163,527 28.4% 1,258,288 27.7% 8.1%
    SME 176,168 4.3% 195,330 4.3% 10.9%
    International 954,584 23.3% 913,054 20.1% -4.4%
               
    Deposits 3,846,179 4,490,714 16.8%
    CASA 1,734,627 45.1% 2,052,256 45.7% 18.3%
    Term deposits 2,111,552 54.9% 2,438,457 54.3% 15.5%
  • ICICI Bank's provision coverage ratio stood at a lowly 59.6%. The total Net NPAs and Net restructured loans as a percentage of net customer assets increased to 4.4% from the earlier 4.0%. The gross NPAs (non performing assets) in absolute terms has doubled over the past 12 months. Net NPAs rose to 3.2% of advances in September 2016, from 1.5% a year earlier. The gross NPAs in retail loan portfolio stood at 1.9% of advances in September 2016.
  • The bank saw a huge gain in its other income during the quarter ended in September 2016. This cushioned the impact of higher provisioning for the bank. The bank sold 12.63% stake in the IPO of ICICI Life Insurance and realized gains of Rs 56.8 billion in 2QFY17. The banks shareholding in the insurance venture stands at 54.9% after the sale.
  • Fee income constituted 19.6% of ICICI Bank's total income in 1HFY17 as against 26.5% in 1HFY16.
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