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ICICI Bank Limited’s (IBN - Analyst Report) fiscal fourth-quarter 2013 (ended Mar 31) net profit came in at INR23.04 billion ($424 million). This reflects a rise of 21% from the year-ago profit of INR19.02 billion ($350 million).

For fiscal 2013, net income was INR83.25 billion ($1.5 billion), up 29% from INR64.65 billion ($1.2 billion) in fiscal 2012.

The robust results came on the back of augmented net interest income and lower loan loss provisions, partially offset by a rise in operating expenses and a decrease in fee income. Though capital ratios were impressive, asset quality deteriorated.  

Performance in Detail

Net interest income grew 22% to INR38.03 billion ($700 million) from INR31.05 billion ($572 million) in the prior-year quarter. However, non-interest income dropped nearly 1% year over year to INR22.08 billion ($407 million).

Operating expenses for the quarter totaled INR24.07 billion ($443 million), 8% higher year over year. The increase was primarily due to the bank’s branch-network expansion. ICICI Bank has the largest branch-network among private sector banks in India. As of Mar 31, 2013, the bank had 3,100 branches and 10,481 ATMs.

Provisions fell 2% year over year to INR4.60 billion ($85 million).

Asset Quality

ICICI Bank’s credit quality deteriorated. As of Mar 31, 2013, net nonperforming assets were INR22.34 billion ($411 million), rising 2% from INR21.85 billion ($402 million) in the prior-year quarter. The bank's net nonperforming asset ratio was 0.64%, increasing 2 basis points from the year-ago quarter.

Balance Sheet

As of Mar 31, 2013, ICICI Bank’s total advances were INR2,902.49 billion ($53.5 billion), rising 14% from INR2,537.28 billion ($46.7 billion) as of Mar 31, 2012. The bank’s savings account deposits amounted to INR856.51 billion ($15.8 billion), while current account deposits totaled INR369.26 billion ($6.8 billion). Moreover, as of Mar 31, 2013, the current and savings account (CASA) ratio was 41.9%.

Capital Ratios

As per the Reserve Bank of India's guidelines on Basel II norm, ICICI Bank's capital adequacy was 18.74% and Tier-1 capital adequacy was 12.80% as of Mar 31, 2013. These were well above the minimum requirements of 9.0% and 6.0%, respectively.

Peer Performance

HDFC Bank Ltd.’s (HDB - Analyst Report) fiscal fourth-quarter 2013 (ended Mar 31) net profit of INR18.90 billion ($0.35 billion) was up 30.1% from the prior-year quarter. Results benefited from improvement in top line, partially offset by a rise in expenses. Moreover, the company reported notable increases in deposits and loans.

Our Take

We anticipate continued synergies from ICICI Bank’s high dependence on domestic loans, almost stable funding base, improving asset mix and enhanced pricing power. However, we are concerned about its highly competitive operating environment, persistent rise in operating expenses and below-average credit quality.

ICICI Bank currently retains a Zacks Rank #3 (Hold). Better performing foreign banks include Banco Macro S.A. (BMA - Snapshot Report) carrying a Zacks Rank #1 (Strong Buy) and Deutsche Bank AG (DB - Analyst Report) with a Zacks Rank #2 (Buy).

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