ICICI Bank Posts Robust Q3 Earnings - Analyst Blog

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ICICI Bank Ltd. ( IBN ) reported fiscal third-quarter 2014 (ended Dec 31) net profit of INR25.32 billion ($410 million). This was up 13% from the year-ago profit of INR22.50 billion ($364 million).

The reported quarter included additional tax provision of INR2.15 billion ($35 million) for deferred tax liability on Special Reserve. Excluding this tax provision, net income grew 22% year over year.

Results improved on the back of top-line growth, partially offset by higher loan loss provisions and a rise in operating expenses. Though capital ratios remained strong and loan and deposit balances increased, asset quality continued to deteriorate.

Performance in Detail

Net interest income grew 22% to INR42.55 billion ($688 million) from INR34.99 billion ($566 million) in the prior-year quarter. Further, net interest margin increased 25 basis points (bps) year over year to 3.32%.

Non-interest income rose 26% year over year to INR28.01 billion ($453 million). The rise was driven by increase in fee income as well as lease and other income, partly offset by negative treasury income.

Operating expenses for the quarter totaled INR26.17 billion ($423 million), up 16% year over year. The increase was primarily due to the bank's expansion of branch network. ICICI Bank has the largest branch network among private sector banks in India. As of Dec 31, 2013, the company had 3,588 branches and 11,215 ATMs.

Asset Quality

ICICI Bank's credit quality deteriorated. As of Dec 31, 2013, net nonperforming assets were INR31.21 billion ($505 million), up 15% from the prior-year quarter. Further, provisions increased 88% year over year to INR6.95 billion ($112 million).

Balance Sheet and Capital Ratios

As of Dec 31, 2013, ICICI Bank's total advances were INR3,326.32 billion ($53.8 billion), rising 16% from INR2,867.66 billion ($46.4 billion) as of Dec 31, 2012. The bank's savings account deposits amounted to INR957.25 billion ($15.5 billion), while current account deposits totaled INR414.41 billion ($6.7 billion). Moreover, the current and savings account (CASA) ratio was 43.3% as of Sep 30, 2013.

In compliance with the Reserve Bank of India's guidelines on Basel III norm, ICICI Bank's capital adequacy was 16.81% and Tier-1 capital adequacy was 11.53% as of Dec 31, 2013. These were well above the minimum requirements.

Performance of Other Foreign Banks

HDFC Bank Ltd. ( HDB ) reported fiscal third-quarter 2014 (ended Dec 31) net profit of INR23.26 billion ($0.38 billion), up 25.1% from the prior-year quarter. Increase in top-line was partially offset by higher operating expenses. Moreover, deposit and loan balances as well as credit quality showed improvement.

Impacted by huge litigation costs, Deutsche Bank AG ( DB ) reported net loss of €965 million ($1.3 billion) in the fourth quarter of 2013 as compared with a loss of €2.5 billion ($3.4 million) in the prior-year quarter. Lower revenues and higher provision for credit losses were partially offset by decrease in expenses.

Another major foreign bank, HSBC Holdings plc ( HSBC ) is scheduled to announce fourth quarter and full-year 2013 results on Feb 25.

Our Take

We expect ICICI bank to continue expanding its foothold in India and other overseas locations. In addition, enhanced services will result in a wider client base, thereby driving growth going forward. However, we remain concerned about the mounting expenses, rise in provision and an intensively competitive Indian market.

At present, ICICI Bank has a Zacks Rank #4 (Sell).



DEUTSCHE BK AG (DB): Free Stock Analysis Report

HDFC BANK LTD (HDB): Free Stock Analysis Report

HSBC HOLDINGS (HSBC): Free Stock Analysis Report

ICICI BANK LTD (IBN): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: CASA , DB , HDB , HSBC , IBN

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