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ICICI Bank's (IBN) Q2 Earnings Increase Y/Y, Expenses Rise

Zacks Equity Research

ICICI Bank’s IBN second-quarter fiscal 2020 (ended Sep 30) net income was INR6.55 billion ($92 million). This included the impact of one-time additional charge due to remeasurement of accumulated deferred tax. Excluding this, adjusted net income was INR35.75 billion ($504 million), up significantly from INR9.09 billion ($128 million) in the prior-year quarter.

Results were driven by rise in revenues, and growth in loans and deposits. Further, provisions and contingencies declined. However, increase in operating expenses was a headwind.

Revenue Components Grow, Expenses Rise

Net interest income jumped 26% year over year to INR80.57 billion ($1.1 billion). Net interest margin was 3.64%, up 31 basis points (bps).

Non-interest income, excluding treasury income, came in at INR38.54 billion ($544 million), up 21% from the prior-year quarter. Fee income increased 16% to INR34.78 billion ($491 million).

Additionally, treasury income was INR3.41 billion ($48 million) against treasury loss of INR0.35 billion ($5 million) in the year-ago quarter.

Operating expenses totaled INR53.78 billion ($759 million), increasing 24% year over year.

Loans & Deposits Increase

As of Sep 30, 2019, ICICI Bank’s total advances amounted to INR6,133.59 billion ($86.5 billion), up 13% year over year. The rise was mainly driven by 22% loan growth in the retail segment.

Total deposits grew 25% to INR6,962.73 billion ($98.2 billion) as of Sep 30, 2019. Also, as of the same date, current and savings account ratio was 46.7%.

Credit Quality Improves

As of Sep 30, 2019, net nonperforming assets (NPA) ratio was 1.60%, decreasing 205 bps year over year. Recoveries and upgrades of non-performing loans through sale were INR12.63 billion ($178 million) during the quarter.

Further, gross NPA additions declined 20% to INR24.82 billion ($350 billion) as of Sep 30, 2019. Also, provisions and contingencies were down 37% from the prior-year quarter to INR25.07 billion ($354 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 16.14% and Tier-1 capital adequacy was 14.62% as of Sep 30, 2019. Both the ratios were well above the minimum requirements.

Our Take

ICICI Bank seems to have reported a decent quarter. Growth in revenues is a major tailwind, which is expected to support the company's financial performance, going forward. However, mounting expenses (owing to continued investment in franchise and digital initiatives) are likely to adversely impact the bank’s bottom line.

ICICI Bank Limited Price, Consensus and EPS Surprise

 

ICICI Bank Limited Price, Consensus and EPS Surprise

 

ICICI Bank Limited price-consensus-eps-surprise-chart | ICICI Bank Limited Quote

ICICI Bank currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance & Earnings Date of Other Foreign Banks

Barclays BCS reported third-quarter 2019 net loss attributable to ordinary equity holders of £292 million ($360 million). This reflects a deterioration from net income attributable to ordinary equity holders of £1.05 billion ($1.37 billion) in the year-ago quarter.

UBS Group AG UBS reported third-quarter 2019 net profit attributable to shareholders of $1.05 billion, down nearly 16% from the prior-year quarter. The company’s performance was affected by slight rise in expenses. Also, results were adversely impacted by fall in net fee and commission income, and lower net interest income.

Deutsche Bank DB is slated to announce results on Oct 30.

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