ICICI Bank, one of India’s leading private sector lenders, reported robust financial performance for the third quarter of the fiscal year, with notable growth in profits and various business segments. The bank’s consolidated net profit for the December quarter surged by 25.7 percent to reach Rs 11,052.60 crore, attributing this significant increase to lower provisions.
In the standalone context, ICICI Bank witnessed a 23.6 percent growth in net profit during the October-December period, reaching Rs 10,272 crore. The core net interest income of the bank rose by 13.4 percent to Rs 18,678 crore, demonstrating the bank’s resilience and ability to generate substantial revenue from its core operations. However, the net interest margin experienced a slight contraction, narrowing to 4.43 percent from 4.65 percent in the year-ago period.
The growth in domestic advances was notable at 18.8 percent, underlining the bank’s commitment to expanding its lending portfolio. The deposit growth also registered a healthy uptick at 18.7 percent. Interestingly, the bank observed faster growth in term deposits, a trend mirrored by its peers, at the expense of low-cost current and savings account deposits, which contributed to improved margins. The credit deposit ratio stood at 86 percent, a level deemed “comfortable” by the management, although it will be closely monitored in the future.
Despite a challenging economic environment, ICICI Bank’s executive director, Sandeep Batra, expressed satisfaction with the Net Interest Margins (NIMs), stating that they met expectations. Looking ahead, the bank anticipates NIMs for FY24 to be broadly in line with those of FY23.
A noteworthy aspect of the financial results is the decline in provisions, dropping to Rs 1,049.37 crore from Rs 2,257.44 crore in the same period the previous year. This reduction occurred even after absorbing a hit of Rs 627 crore due to investments in alternative investment funds, following a directive from the Reserve Bank of India (RBI). Batra explained that nearly the entire stock of alternative investment funds has been provided for. The decrease in provisions was attributed to a contingency provision taken in the previous year and the impact of a shift in provisioning policies.
Examining the asset quality front, the bank reported gross slippages exceeding Rs 5,000 crore, primarily driven by rural advances, which exhibit a seasonal pattern. In response to concerns raised by the RBI, ICICI Bank slowed down the growth in unsecured lending during the quarter. Personal loans, a significant component of unsecured lending, grew at 37 percent in Q3, a slight moderation from the 40 percent growth rate seen earlier.
The bank also addressed concerns related to its exposure to non-bank lenders, a sector flagged by the RBI. The exposure reduced to over Rs 74,000 crore, down from over Rs 79,000 crore three months ago. This decline was attributed to payments made by some state-run companies. Despite regulatory changes impacting risk weights, Batra clarified that the bank’s capital adequacy remained robust. The core buffer levels stood at a comfortable level of over 16 percent, even after accounting for the higher risk weights.
In addition to the bank’s performance, its subsidiaries significantly contributed to the overall growth. The life insurance arm reported a marginal increase in Profit After Tax (PAT) to Rs 227 crore. The general insurance arm witnessed a robust 22.1 percent growth in net profit, reaching Rs 431 crore. The asset management company delivered an impressive 30 percent growth in net profit, amounting to Rs 546 crore. The brokerage business demonstrated remarkable growth, with net profits soaring by 66 percent to Rs 466 crore.
In conclusion, ICICI Bank’s Q3 results reflect a resilient financial performance amid economic challenges. The bank’s focus on core operations, prudent risk management, and the contributions from its subsidiaries have collectively contributed to its positive trajectory. As the banking landscape evolves, monitoring asset quality, maintaining a balanced deposit portfolio, and navigating regulatory changes will remain key priorities for ICICI Bank in the upcoming fiscal year.