Private sector lender ICICI Bank on Saturday recorded its highest-ever quarterly profit of Rs 9,211 crore for the January-March quarter, which is an increase of 30 per cent over the same period last year on the back of impressive margin expansion.
Net interest income (NII) – the difference between interest earned and interest expanded – increased by 40.2 per cent year-on-year to Rs 17,667 crore in Q4 2023.
The net interest margin for the quarter was 4.90 per cent compared to 4.00 per cent in Q4 of the previous financial year and 4.65 per cent in the previous quarter.
Sandeep Batra, executive director, ICICI Bank, said the margin expansion was due to faster increase in the lending rate as compared to the deposit rate. He also indicated that the margins may have peaked.
“As the repo rate is increasing the loan book re-prices faster than the borrowings. I think with the repo probably at the peak or near peak expansion on the income side it has already taken place. Now catching up from the deposit side will take place. So obviously, we would believe that NIMs would be near peak and there probably be a downward bias as we progress,” Batra said in the post-earnings media call.
ICICI Bank’s yield on advances was 9.75 per cent during the January-March quarter, and in the previous quarter it was 9.13 per cent . The cost of deposits in Q3 was 3.65 per cent and in Q4 was 3.98 per cent . The increase in the yield on advances was much sharper than the rise in deposit costs – which explains the impressive margin expansion.
The bank’s 46 per cent of the loans are linked to repo rate, another 3 per cent to other external benchmarks. At least 31 per cent are fixed-rate loans and 19 per cent are linked to MCLR (marginal cost of fund-based lending rate).
Non-interest income, excluding treasury income, increased by 11.3 per cent year-on-year to Rs 5,127 crore. The bank incurred a treasury loss of Rs 40 crore in Q4FY23 compared to a gain of Rs 129 crore in Q4FY22.
The second largest private sector lender in the country reported an 18.7 per cent increase in credit growth to Rs 10.2 trillion on the back of a 22.7 per cent increase in the retail loan portfolio which was 54.7 per cent of the total loans. The business banking book grew by 34.9 per cent while the domestic corporate loans grew by 21.2 per cent . Deposit growth lagged credit growth which grew by 10.9 per cent .
“We are comfortable with the deposit growth. As we have seen deposit growth in the second half has been much higher than the first half of the year (FY24)… We have added 480 branches in Fy23 – this is an important part of our overall strategy. I don’t think deposits will be a constraint to our ability to grow our assets in a risk-calibrated manner,” Batra said.
The gross NPA ratio declined to 2.81 per cent at March 31, 2023 from 3.07 per cent at December 31, 2022. The net NPA ratio declined to 0.48 per cent at March 31, 2023 – one of the lowest in the industry – from 0.55 per cent at December 31, 2022 and 0.76 per cent at March 31, 2022.
“The net addition from gross NPAs, excluding write-offs and sale, were Rs 14 crore in Q4-2023 compared to Rs 1,119 crore in the quarter ended December 31, 2022,” the bank said.
Provisions (excluding provision for tax) increased by 51.5 per cent year-on-year to Rs 1,619 crore, which includes contingency provision of Rs 1,600 crore made on a prudent basis. The bank held a contingency provision of Rs 13,100 crore as on March 31, 2023.
“We are doing it on a prudent level given the macro level uncertainty, Batra said when asked about the reason for the contingency provision.
ICICI Bank’s total capital adequacy ratio at March 31, 2023 was 18.34 per cent and Tier-1 capital adequacy was 17.60 per cent compared to the minimum regulatory requirements of 11.70 per cent and 9.70 per cent respectively.
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