ICICI Bank (IBN) Reports Lower Q2 Profit, Stock Rallies 4.8%

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ICICI Bank Ltd.IBN announced second-quarter fiscal 2019 (ended Sep 30) results. It reported a quarterly net income of INR9.09 billion ($125 million) down 56% from net income of INR20.58 billion ($284 million) in the year-ago quarter.

Despite the dismal performance, shares of ICICI Bank gained 4.8% on the NYSE on Friday. Perhaps improvement in loans and deposits along with better credit quality were the primary reasons for the bullish investor sentiment.

Also, rise in net interest income, higher fee income and strong capital position were the tailwinds. However, results were negatively impacted by an increase in operating expenses.

Growth in Revenue Components Offset by Expense Rise

Net interest income jumped 9.2% year over year to INR64.18 billion ($885 million). Net interest margin was 3.33%.

Non-interest income, excluding treasury income, came in at INR31.91 billion ($440 million) up 6.6% from the prior-year quarter. Notably, fee income increased 17% to INR25.7 billion ($355 million).

Operating expenses totaled INR43.24 billion ($596 million), increasing 10.6% year over year.

Loans & Deposits Increase

As of Sep 30, 2018, ICICI Bank's total advances amounted INR5,444.87 billion ($75.1 billion), up 13% year over year. The rise was mainly driven by robust growth of 20% in the retail segment that constituted about 57% of the total loan portfolio.

ICICI Bank's total deposits rose 12% from the prior-year quarter to INR5,586.69 billion ($77.1 billion) as of Sep 30, 2018. Moreover, as of the same date, current and savings account ratio was 50.8%.

Credit Quality Improves

As of Sep 30, 2018, net nonperforming assets ratio was 3.65%, decreasing 54 basis points sequentially. Net loans to companies, facilities of which have been restructured, were INR14.13 billion ($195 million) as of Sep 30, 2018.

Moreover, provisions and contingencies were down 11.3% from the prior-year quarter to INR39.94 billion ($551 million).

Capital Ratios Improve

In compliance with the Reserve Bank of India's guidelines on Basel III norms, ICICI Bank's capital adequacy was 17.84% and Tier-1 capital adequacy was 15.38% as of Sep 30, 2018. Both the ratios were well above the minimum requirements.

Our Take

ICICI Bank seems to have reported a decent quarter. Improving asset quality is a major tailwind, which is expected to support the company's financial performance. Also, it remains well positioned to capitalize on growth opportunities driven by increased dependence on domestic loans and a stable fund base. However, mounting expenses owing to continued investment in franchise are likely to adversely impact the bank's bottom line.

ICICI Bank Limited Price, Consensus and EPS Surprise

ICICI Bank Limited Price, Consensus and EPS Surprise | ICICI Bank Limited Quote

ICICI Bank currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here .

Performance of Other Foreign Banks

UBS Group AG UBS reported third-quarter 2018 net profit attributable to shareholders of CHF 1.2 billion ($1.2 billion), up around 31.7% from the prior-year quarter.

Barclays BCS reported third-quarter 2018 net income attributable to ordinary equity holders of £1 billion ($1.30 billion). This reflects improvement from net income attributable to ordinary equity holders of £583 million ($792.6 million) recorded in the prior-year quarter.

Deutsche Bank AG DB reported net income of €229 million ($267.4 million) in third-quarter 2018, which tanked 64.7% from year-ago quarter. Income before taxes plunged 45.8% to €506 million ($590.9 million).

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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 Nasdaq, Inc.

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

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