Stock Review: ICICI Bank

ICICI Bank is known to do things differently. So, it's not surprising that when other banks are trimming their loan books sequentially to hold on to profitability, ICICI Bank, India's largest private sector bank, is growing its books. At the end of the first quarter of FY12, advances increased 20 per cent year-on-year to `2,20,693 crore from `1,84,378 crore in the corresponding period of the previous year. Savings deposits increased 18 per cent to `66,858 crore. While the industry faces awidespread decline in demand deposits, the bank's Casa ratio at stood at 41.9 per cent in Q1FY12.

However, the bank has not grown its books at the cost of profits. While the ICICI Bank's net interest income at `2,410 crore came in slightly below the expectations of the street, its net profit grew 30 per cent to `1,332 crore. Broadly, the bank's numbers are more or less in line with the Street's expectations. The growth in net profit has been led by lower operating expenses.

The bank's net interest income grew by 21.1 per cent yearon-year to `2,410 crore, but on a sequential basis it is down four per cent. This has been driven by advance growth of 20 per cent YoY and two per cent quarter-on-quarter. However, net interest margins have remained stable at 2.6 per cent sequentially, despite the growth in loan advances.

Analysts believe ICICI Bank's loan growth will be spearheaded by the corporate segment (34 per cent CAGR over FY11-13). Even on the retail lending side, the bank has redrawn its strategy to focus on the collateralised segment and loan rates have been aligned to the market. A prudent shift towards retail liabilities, selective asset growth and softer borrowing costs should drive 30 basis points expansion in margins over FY11-13. Despite rising interest rates, the asset quality has also remained stable, with gross NPAs at `9,980 crore compared to `9,970 crore in the corresponding quarter last financial year. Provisioning coverage ratio is also stable at 76.9 per cent, claim analysts. However, analysts say the bank would have posted higher profits if it were not for the trading loss of `25 crore. Last year, the bank had posted a trading gain of `104 crore in the same period.