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ICICI Bank's (IBN) Q1 Earnings Rise Y/Y, Provisions Surge

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ICICI Bank’s (IBN - Free Report) first-quarter fiscal 2021 (ended Jun 30) net income was INR25.99 billion ($344 million), up 36% from INR19.08 billion ($253 million) in the prior-year period. The net income included coronavirus-related provisions of INR55.50 billion ($735 million).

The results were driven by a rise in net interest income, growth in loans and deposits, as well as lower operating expenses. However, provisions surged owing to coronavirus-related concerns. Further, decline in non-interest income was a headwind.

Net Interest Income Up, Expenses Down

Net interest income rose 20% year over year to INR92.80 billion ($1.2 billion). Net interest margin was 3.69%, up 8 basis points (bps) year over year.

Non-interest income — excluding treasury income — was INR23.80 billion ($315 million), down 27% from the prior-year quarter. Fee income also decreased 31% from the year-ago quarter to INR21.04 billion ($279 million). The decline was mainly due to lower business volumes and customer activity amid the lockdown.

Further, treasury income was INR37.63 billion ($498 million), up substantially from INR1.79 billion ($24 million) in the year-ago quarter. During the reported quarter, the company sold a 4% stake in ICICI Lombard General Insurance and 1.5% shareholding in ICICI Prudential Life Insurance. These transactions resulted in aggregate gains of INR30.36 billion ($402 million). 

Operating expenses totaled INR46.46 billion ($615.3 million), down 5% year over year.

Loans & Deposits Increase

As of Jun 30, 2020, ICICI Bank’s total advances amounted to INR6,312.15 billion ($83.6 billion), up 7% year over year.

Total deposits grew 21% from the comparable year-ago period to INR8,016.22 billion ($106.2 billion) as of Jun 30, 2020. Also, as of the same date, average current and savings account ratio was 41%.

Credit Quality: Mixed Bag

As of Jun 30, 2020, net nonperforming assets (NPA) ratio was 1.41%, decreasing 18 bps year over year. Recoveries and upgrades from non-performing loans were INR7.57 billion ($100 million) in the quarter. Further, gross NPA additions were INR11.60 billion ($154 billion).

Provisions (excluding coronavirus related provisions and provision for tax) decreased 42% from the prior-year quarter to INR20.44 billion ($271 million). Notably, the company built additional INR55.50 billion ($735 million) provisions related to the coronavirus pandemic.

Capital Ratios Strong

In compliance with the Reserve Bank of India's guidelines on Basel III norms, ICICI Bank's total capital adequacy was 16.32% and Tier-1 capital adequacy was 14.93% as of Jun 30, 2020. Both the ratios were well above the minimum requirements.

Our Take

ICICI Bank’s quarterly performance was decent. Growth in net interest income was a major tailwind, which is expected to support the company's financial performance going forward. However, elevated expenses are likely to adversely impact the bank’s bottom line. Also, coronavirus-induced market mayhem is a major headwind.

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.

Earnings Release Dates of Other Foreign Banks

Barclays (BCS - Free Report) and Deutsche Bank (DB - Free Report) are set to report second-quarter 2020 results on Jul 29. HSBC Holdings (HSBC - Free Report) is scheduled to announce quarterly numbers on Aug 3.

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