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ICICI Bank Ltd (updated - 28 July 2009)
ICICI Bank’s rather subdued numbers for the June 2009 quarter suggest that it could take awhile to get back on track. Core profits (net interest income plus fees minus costs minus loan provisions) of the bank were down 65 per cent year-on-year and about 40 per cent sequentially.

If the bank managed to post net profits of Rs 878 crore, it was thanks to capital gains of Rs 700 crore and lower costs; since interest rates are likely to move up, such gains may be hard to come by in the near future.

With the bank making attempts to reduce exposure to the riskier retail segment, the loan book contracted 9 per cent sequentially. Also, the net interest margin (NIM) slipped 20 basis points sequentially to 2.4 per cent, even though the share of cheaper current and savings accounts (CASA) increased, possibly because the quantum of high-yield retail loans is smaller and also because loans to priority sector tend to command lower yields.

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ICICI Bank Ltd (updated - 28 April 2009)
The Street wasn’t expecting much from ICICI Bank and so the 35 per cent fall in net profit to Rs 744 crore in the March 2009 quarter didn’t come as a big disappointment. On the other hand, the quality of earnings came as a pleasant surprise — the bank’s net interest margin (NIM) rose 20 basis points sequentially to 2.6 per cent. That’s because the bank has been borrowing less in the wholesale market and saving on interest costs. Moreover, the proportion of cheaper current and savings accounts (CASA) went up by 130 basis points sequentially to 28.7 per cent and after many quarters, deposits too grew sequentially.

What was most reassuring about the numbers was that fresh delinquencies appear to have stabilised because the accretion to non performing loans (NPLs) at Rs 1,250 crore, was more or less at the same level as in the December quarter. Gross NPLs may have moved up to 4.32 per cent from 4.14 due to slippages in the retail book and there could well be a further deterioration in asset quality — more assets may be restructured, especially corporate loans —but the increase to NPLs is likely to smaller going ahead and therefore, not debilitating.

If one considers the restructured assets including the applications that are pending, the gross npls would be higher while the coverage ratio which is now 52 per cent would drop sharply. Nevertheless, the bank is choosing to preserve capital rather than grow the loan book which fell 3 per cent y-o-y during the March quarter. That’s probably the best approach in the current difficult environment.

With the loan book barely growing sequentially, fees income remained flat. Looking ahead, it could take a while before the momentum picks up - loan growth should remain subdued this year though it could become more profitable with the share of CASA expected to increase to 33 per cent by the end of the current year.Earnings, however, may grow at just about 10 per cent.
source - BS

The bank was earning an NIM of around 3 per cent on the domestic book, thanks to a high share of high-yielding assets. But it is unlikely to expand meaningfully this year with the loan book likely to see marginal growth.

While there was a reduction in restructured loans during the quarter -the bank restructured around Rs 1,400 crore worth of loans - and a large quantum of loans was also upgraded, analysts point out that the impaired loan ratio for the bank remains somewhere around 8.5-9 per cent.

That is not low and suggests that the cost of credit will remain high. New gross non performing loans (NPL) during the quarter were about Rs 1,300 crore and analysts estimate that about 5-6 per cent of the loan book was impaired at a gross level during the quarter on an annualised basis.

Also, while the bank provided a fairly large amount of money for bad loans, coverage wasn’t quite up to the mark. Unless, loan growth picks up later in the year, the asset book may be higher by just about 3-4 per cent for the year and profits, therefore, unexciting.
source - BS

ICICI Bank Ltd (updated - 03 Nov 2009)
ICICI Bank’s earnings grew just 2.6 per cent in the September 2009 quarter, with a 14 per cent year-on-year contraction in loans, driven by a sharp drop in retail loans. Despite a fall in the net interest income of 5 per cent year-on-year, the net interest margin was steady at 2.5 per cent, while the operating profit was up 6 per cent year-on-year and 18 per cent sequentially, thanks to lower operating costs.

It’s a fact that the bank has been forced into a consolidation phase following a period of aggressive lending, during which it piled up a large quantum of delinquencies. It’s now in the process of undoing the damage.

Asset quality remains uneven, though there is some improvement with non-performing loans (post-write-offs and sell downs of around Rs 1,300 crore) at Rs 1,100 crore in the September quarter compared with Rs 1,400 crore in the June quarter.

About 70 per cent of the gross NPLs (nonperforming loans) relate to retail assets and a fairly high share of the retail net NPLs relate to unsecured products. While the amount of loans restructured, at just under Rs 5,000 crore, is now at 2.5 per cent of the loans, it’s possible more may need to be restructured and analysts estimate these could rise to 3-3.5 per cent of the loan book. Also, the provisioning coverage ratio, at 51 per cent, is modest and this could increase with the central bank tightening the norms.

Nevertheless, the bank has adequate capital to be able to grow the loan book. Also, it plans to expand the branch network by adding about 400 branches in the next year or so.

That should fetch it more fee income, as also more savings accounts. The bank has been shedding high-cost deposits to bring down the cost of liabilities; the strategy is paying off, with the share of cheaper current and savings accounts (Casa) higher at 37 per cent in the September quarter, up from 33 per cent in the June quarter.

Since the results have surprised qualitatively in terms of higher Casa and steady margins, the ICICI stock may see some movement. However, it’s a tad soon to call a turnaround. There are problem areas such as the international assets, which account for a fourth of the loan book and are not so profitable. Also, ICICI needs to demonstrate that it can lend large sums profitably, without creating NPLs.
source - BS