ICICI bank surpasses quarterly estimates, achieves record profit despite margin contraction

The standout performance was fueled by a remarkable 18.8% year-on-year growth in total loans, primarily driven by an upswing in retail loans.

India’s ICICI Bank (ICBK.NS) has exceeded market expectations by announcing a robust third-quarter profit, propelled by substantial loan growth. Despite facing a decline in its net interest margin (NIM) for the fourth consecutive quarter, the country’s second-largest private bank reported a standalone net profit of 102.72 billion rupees ($1.24 billion) for the quarter ending December 31, surpassing analysts’ predictions of 100.25 billion rupees, according to LSEG data.

The standout performance was fueled by a remarkable 18.8% year-on-year growth in total loans, primarily driven by an upswing in retail loans. Concurrently, deposits also witnessed an impressive 18.7% increase, showcasing the bank’s ability to attract and retain customers in a competitive market.

However, ICICI Bank experienced a contraction in its net interest margin, falling from 4.65% last year to 4.43% in the latest quarter. The downward trend, observed since the second quarter when NIM was at 4.53%, reflects the broader challenge faced by Indian lenders as rising deposit costs continue to put pressure on margins. HDFC Bank, India’s largest private lender, recently reported weak margins for the second consecutive quarter, underscoring the industry-wide concern.

Despite these challenges, ICICI Bank’s net interest income climbed 13.4% to 186.78 billion rupees, demonstrating the bank’s ability to generate revenue amidst margin compression. The bank’s asset quality also showed improvement, with the gross non-performing assets ratio decreasing from 2.48% at the end of September to 2.30% as of December-end.

In response to regulatory changes, ICICI Bank has allocated 6.27 billion rupees towards its exposure to alternative investment funds (AIFs). The bank’s executive director, Sandeep Batra, emphasized that the bank views this exposure as a long-term investment with the expectation of returns over time. Batra clarified that there is no rush to wind down this exposure.

However, the bank did face challenges related to the Reserve Bank of India’s increased risk weights on unsecured loans, taking a hit of around 70 basis points on its capital ratio. Despite this setback, ICICI Bank’s shares closed 1% higher ahead of the quarterly results, indicating investors’ confidence in the bank’s overall performance.