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ICICI Bank (IBN) Stock Down 4.6% as Q4 Earnings Decline

Zacks Equity Research

Shares of ICICI Bank IBN have declined 4.6% on the NYSE since the release of its fourth-quarter and fiscal 2019 (ended Mar 31) results. Net income of INR9.69 billion ($140 million) was down 5% year over year.

For fiscal 2019, net income of INR33.63 billion ($486 million) plunged 50% year over year. Results for both the years included gain on sale of shareholding in subsidiaries.

Quarterly results reflect an increase in operating expenses and higher provisions. However, rise in net interest income, higher non-interest income, and growth in loans and deposits were tailwinds.

Revenue Components Grow, Expenses Rise

Net interest income jumped 27% year over year to INR76.20 billion ($1.1 billion). Net interest margin was 3.72%, up 48 basis points (bps).

Non-interest income, excluding treasury income, came in at INR34.65 billion ($501 million) up 16% from the prior-year quarter. Notably, fee income increased 15% to INR31.78 billion ($460 million).

Operating expenses totaled INR50.08 billion ($724 million), increasing 20% year over year.

Loans & Deposits Increase

As of Mar 31, 2019, ICICI Bank’s total advances amounted to INR5,866.47 billion ($84.8 billion), up 15% year over year. The rise was mainly driven by 22% loan growth in the retail segment.

Total deposits grew 16% to INR6,529.20 billion ($94.4 billion) as of Mar 31, 2019. Also, as of the same date, current and savings account ratio was 49.6%.

Credit Quality: A Mixed Bag

As of Mar 31, 2019, net nonperforming assets (NPA) ratio was 2.06%, decreasing 52 bps sequentially. Recoveries, upgrades and resolution of non-performing loans through sale were INR15.22 billion ($220 million) during the reported quarter.

However, gross NPA additions surged 70% sequentially to INR35.47 billion ($513 billion) as of Mar 31, 2019. Also, provisions and contingencies were up 28% from the prior quarter to INR54.51 billion ($788 million).

Strong Capital Ratios

In compliance with the Reserve Bank of India's guidelines on Basel III norms, ICICI Bank's total capital adequacy was 16.89% and Tier-1 capital adequacy was 15.09% as of Mar 31, 2019. Both the ratios were well above the minimum requirements.

Our Take

ICICI Bank seems to have reported a decent quarter. Growth inrevenues is a major tailwind, which is expected to support the company's financial performance, going forward. While mounting expenses (owing to continued investment in franchise and digital initiatives) are likely to adversely impact the bank’s bottom line, it remains well positioned to capitalize on growth opportunities driven by increased dependence on domestic loans and a stable fund base.

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

Performance of Other Foreign Banks

Barclays BCS reported first-quarter 2019 net income attributable to ordinary equity holders of £1.04 billion ($1.36 billion). This reflects improvement from net loss of £764 million ($1.01 billion) incurred in the prior-year quarter.

HSBC Holdings HSBC recorded first-quarter 2019 pre-tax profit of $6.2 billion, up 30.7% year over year. This increase was due to rise in revenues.

Deutsche Bank DB reported net income of €201 million ($467.1 million) in first-quarter 2019, up 67% from €120 million in the year-ago quarter. The bank reported profit before taxes of €292 million ($364.3 million).

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