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ICICI Bank's (IBN) Q2 Earnings Up Y/Y, Provisions Increase

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ICICI Bank’s (IBN - Free Report) second-quarter fiscal 2021 (ended Sep 30) net income was INR42.51 billion ($576 million), up substantially from INR6.55 billion ($89 million) in the prior-year quarter.

The company’s shares on the NYSE have rallied 7.1% in the pre-market trading. A full day’s trading session will provide a better picture.

The results were driven by a rise in net interest income, growth in loans and deposits and 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 16% year over year to INR93.66 billion ($1.3 billion). Net interest margin was 3.57%, down 7 basis points (bps).

Non-interest income (excluding treasury income) was INR34.86 billion ($473 million), down 10% from the prior-year quarter. Fee income also decreased 10% to INR31.39 billion ($426 million).

Further, treasury income was INR5.42 billion ($73 million), up 59% from the year-ago quarter. During the reported quarter, the company sold a 42% stake in ICICI Securities, which resulted in gains of INR3.05 billion ($41 million).

Operating expenses totaled INR51.33 billion ($695.81 million), down 5% year over year.

Loans & Deposits Increase

As of Sep 30, 2020, ICICI Bank’s total advances amounted to INR6,526.08 billion ($88.5 billion), up 6% year over year.

Total deposits grew 20% to INR8,329.36 billion ($112.9 billion) as of Sep 30, 2020.

Credit Quality Worsening

As of Sep 30, 2020, net nonperforming assets (NPA) ratio was 1.00%. Recoveries and upgrades (excluding write-offs) from non-performing loans were INR19.45 billion ($264 million) in the quarter. Further, gross NPA additions were INR30.17 billion ($409 billion).

Provisions (excluding provision for tax) increased 19% from the prior-year quarter to INR29.95 billion ($406 million). This included provision of INR4.97 billion ($67 million) made on a prudent basis on loans worth INR14.10 billion ($191 million) that were not classified as non-performing “pursuant to the Supreme Court’s interim order dated September 3, 2020 directing that accounts which were not classified as non-performing till August 31, 2020, should not be classified as non-performing until further orders.”

As of Sep 30, 2020, ICICI Bank held Covid-19-related provision of INR87.72 billion ($1.2 billion).

Capital Ratios Strong

In compliance with the Reserve Bank of India's guidelines on Basel III norms, ICICI Bank's total capital adequacy was 19.33% and Tier-1 capital adequacy was 17.89% as of Sep 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.


Performance of Other Foreign Banks

Barclays (BCS - Free Report) reported third-quarter 2020 net income attributable to ordinary equity holders of £611 million ($789 million) against a net loss recorded in the prior-year quarter.

HSBC Holdings’ (HSBC - Free Report) third-quarter 2020 pre-tax profit of $3.1 billion represents a decline of 36.4% from the prior-year quarter’s reported number.

Deutsche Bank (DB - Free Report) reported third-quarter 2020 net income of €309 million ($361.1 million) against the year-ago quarter’s net loss of €832 million. Also, the German lender reported adjusted profit before taxes of €826 million ($965.3 million) against a loss of $84 million in the year-ago quarter.

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