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Business News/ Companies / ICICI Bank, Yes Bank Q2 profits beat estimates
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ICICI Bank, Yes Bank Q2 profits beat estimates

ICICI Bank's net profit rises 15% to Rs2,709 cr from a year ago; Yes Bank's jumps 30% from a year ago to Rs483 cr

However, provisions for bad loans rose 36% to Rs850 crore in the second quarter, as compared with Rs625 crore a year ago. Photo: MintPremium
However, provisions for bad loans rose 36% to Rs850 crore in the second quarter, as compared with Rs625 crore a year ago. Photo: Mint

Mumbai: ICICI Bank Ltd, India’s largest private sector bank, on Thursday said stand-alone net profit rose 15% in the September quarter as it earned higher interest income, particularly on loans made to individuals.

Net profit rose to 2,709 crore in the three months from 2,352 crore in the year-ago period, the bank said. The profit was slightly higher than an estimate of 2,686 crore in a Bloomberg poll of 35 analysts.

Net interest income (NII), or the difference between interest earned on loans and that paid on deposits, increased 15% to 4,657 crore from 4,043.5 crore, driven by retail loans which rose 25% year-on-year.

ICICI Bank’s smaller private sector peer Yes Bank Ltd also announced its July-September 2014 results on Thursday, reporting a 30% rise in net profit to 483 crore from 371 crore in the year-ago quarter. Yes Bank’s profit was also higher than the 457 crore forecast by a Bloomberg poll of 33 analysts.

ICICI Bank’s profit growth was driven by demand for loans from individuals, mainly to buy homes and vehicles. Loan demand from companies rose a mere 5%.

Corporate credit demand has slowed in the face of an economic downturn that pushed growth to sub-5% levels in each of the previous two fiscal years and as projects stalled because of delays in securing regulatory approvals and completing land acquisition.

Economic growth is forecast to rebound this year.

Managing director and chief executive officer Chanda Kochhar said demand for loans from firms will take at least “a couple of quarters" more to come through.

“There is a lag between economic recovery and growth in corporate demand. First, corporate production will go up, which will lead to demand for working capital loans and, as company cash flows improve, there will be a revival in investments, which will lead to a pick-up in loan demand," Kochhar said.

The low demand for loans from companies pulled the bank’s overall credit growth down to 14%, though its was faster than the banking system’s current growth of about 11%.

ICICI Bank’s net non-performing assets (NPAs) as a proportion of overall loans increased to 1.09% in September 2014 up from 0.85% a year ago and 0.99% in the June quarter.

Kochhar said the rise in NPAs was systemic. “NPAs have gone up for all banks. In our case, a large chunk of NPAs came from loans that were already restructured. We expect that the NPAs additions this year as a whole will be less than last year," she said, adding that the bank will continue to expand its loan book 2-4% faster than the industry average.

The rise in NPAs at ICICI Bank is not a big concern, but the bank needs to now focus on getting its corporate loan book in order, said Rakesh Shinde, research analyst at Bonanza Portfolio Ltd, an institutional equities brokerage.

“Close to 60% of the bank’s loan book is to companies; from here, if it wants to grow, it has to concentrate on this section. Already, though its loan book has grown faster than the system, it is still slower than banks like Yes Bank and Axis Bank, which have grown at 30% and 20%, respectively," Shinde said.

Yes Bank’s loan book rose 30%, led by demand for loans from small and medium enterprises (SMEs) and working capital requirement of companies, chief financial officer Rajat Monga said.

Profit increased mainly because of higher NII and improvement in the net interest margin (NIM)—the difference between the interest rate charged on loans and that paid for deposits—and a drop in provisions for bad loans.

Yes Bank’s NII increased 27% to 856 crore from 672 crore. NIM widened to 3.2% from 2.9% a year ago.

Provisions for bad loans dropped 33% to 120 crore in the quarter ended September from 179 crore a year ago but were higher than the 24 crore the bank set aside in the quarter ended June.

ICICI Bank shares rose 0.47% to close at 1,611.50 on BSE and Yes Bank shares ended at 662.70, up 3.8%, while the benchmark Sensex rose 0.92% to close at 27,346.33 points.

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Published: 30 Oct 2014, 01:29 PM IST
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