Last updated: 30 Jan, 2021 | 05:24 pm
Profit beats estimates: The net profit grew 19% on-year to ₹4,939.60 crore in Q3FY21, beating street expectations. Analysts had earlier anticipated a profit of about ₹4,242.60 crore. The bank was able to post a higher profit on the back of a healthy rise in Net Interest Income.
Net interest income rises: A bank's primary business is to borrow money and lend the same at a rate higher than the rate at which they borrowed. The income generated from this differential is known as net interest income. Net interest income for ICICI Bank grew 15% YoY to ₹9,912 crore. Net interest margin expanded 10 bps to 3.67% for the quarter.
Asset quality improves: The bank's asset quality improved with the gross non-performing asset ratio reducing to 4.38% of total advances as against 5.17% in Q2. Net NPA ratio for the bank fell 37 basis points to 0.63%. ICICI Bank set aside total provisions worth Rs 2,741 crore, up 31% from the previous year.
The bank has changed its provisioning policy on non performing assets to make it more conservative. The change in policy resulted in higher provisions on advances amounting to Rs 2,096 crore, for aligning provisions on the outstanding loans to the revised policy, said the bank.
Update on moratorium: The RBI had permitted banks to offer a moratorium to borrowers until the end of August to help them mitigate the impact of the pandemic. Following this, the Reserve Bank of India in September permitted one-time restructuring of advances of companies and retail borrowers hit by the Covid-19 pandemic. While these assets don't have to be marked as NPAs, banks have been asked to disclose details of the restructured assets.
In case the order would not have been in effect, the gross NPA would have been 5.42% (as against 4.38%) for December quarter. The Net NPA ratio would have been 1.26% (as against 0.63%).
Deposits: The bank's deposits aggregated to approximately ₹8.74 lakh crore as of Dec-20, a growth of around 22% on-year. Bank's CASA (current and savings account) deposit now comprise 42.8% of total deposits of the bank. CASA capital is the cheapest source of capital for banks. The higher the number the more profit a bank can earn. Advances were up 10% on-year to Rs 6.99 lakh crore.
Despite the effects of the pandemic, ICICI Bank has delivered strong results in the Oct-Dec 20 period. The bank has been able to maintain a healthy deposit and advances growth rate, on the back of a festive pick-up and strong growth in retail loans. The bank is seeing some revival in corporate loan demand, even though retail credit demand has led most of the growth during October-December. Auto loan disbursals crossed pre-Covid levels, while credit card spends had reached levels seen in the earlier part of the year, before the pandemic affected spends.
The asset quality of the bank has also shown improvement. The bank's capital adequacy ratio (19.51%) reminds well above the regulatory requirements (11.8%). Even though the current economic environment is extremely stressful for the banking Industry, we believe ICICI Bank has the necessary firepower to tide over these turbulent times.