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ICICI Bank (IBN) Q3 Earnings Increase Y/Y, Expenses Rise

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ICICI Bank’s IBN third-quarter fiscal 2020 (ended Dec 31) net income was INR41.46 billion ($581 million), up significantly from INR16.05 billion ($225 million) in the prior-year quarter.

Results were driven by rise in revenues, and growth in loans and deposits. Further, provisions declined on a year-over-year basis. However, an increase in operating expenses was a headwind.

Revenue Components Improve, Expenses Rise

Net interest income rose 24% year over year to INR85.45 billion ($1.2 billion). Net interest margin was 3.77%, up 37 basis points (bps) year over year.

Non-interest income, excluding treasury income, was INR40.43 billion ($566 million), up 19% from the prior-year quarter. Fee income increased 17% to INR35.96 billion ($504 million).

Additionally, treasury income was INR5.31 billion ($74 million), up 11% from the year-ago quarter.

Operating expenses totaled INR55.71 billion ($780.4 million), increasing 21% year over year.

Loans & Deposits Increase

As of Dec 31, 2019, ICICI Bank’s total advances amounted to INR6,356.54 billion ($89 billion), up 12.6% year over year.

Total deposits grew 18% to INR7,163.45 billion ($100.3 billion) as of Dec 31, 2019. Also, as of the same date, current and savings account ratio was 47%.

Credit Quality Improves

As of Dec 31, 2019, net nonperforming assets (NPA) ratio was 1.49%, decreasing 109 bps year over year. Recoveries and upgrades from non-performing loans were INR40.88 billion ($573 million) in the quarter.

Further, in the quarter, gross NPA additions were INR43.63 billion ($611 billion). Provisions were down 51% from the prior-year quarter to INR20.83 billion ($292 million).

Capital Ratios Strong

In compliance with the Reserve Bank of India's guidelines on Basel III norms, ICICI Bank's total capital adequacy was 16.50% and Tier-1 capital adequacy was 14.98% as of Dec 31, 2019. Both the ratios were well above the minimum requirements.

Our Take

ICICI Bank seems to have reported a decent quarter. Growth in revenues was 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 #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance & Earnings Release Dates of Other Foreign Banks

UBS Group AG UBS reported fourth-quarter 2019 net profit attributable to shareholders of $722 million compared with $315 million in the prior-year quarter. The company’s performance was supported by higher net interest income along with rise in net fee and commission income. Further, a decline in expenses was a tailwind.

Deutsche Bank Aktiengesellschaft (DB - Free Report) is slated to report results on Jan 30, while Itau Unibanco Holding S.A. ITUB will report on Feb 3.

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