ICICI Bank posted better-than-expected profit growth in the December quarter due to strong net interest income expansion and fall in provisions (for the seventh quarter in a row) .

The standalone net profits grew by 20 per cent year-on-year.Lower rise in operating expenses also aided profits.

ICICI Bank, which in previous quarters managed strong growth in profits mainly due to fall in provisions, has this time witnessed core income (net interest income) contributing to the earnings. The net interest income, thanks to growth in advances and improvement in margins, grew by 17.3 per cent year-on-year. Fee income continues to remain muted especially due to subdued activity in the corporate banking segment.

Growth in advances of 19 per cent was primarily driven by corporate and overseas books (and also due to rupee depreciation). Contrary to the industry trend, advances growth of ICICI Bank outpaced investment growth for the year ended December 2011.

NIM improves

Even as the share of high yielding retail loan book declined, the bank managed to improve its net interest margin (NIM) during this quarter. The NIMs improved from 2.6 per cent in December 2010 and 2.61 per cent in September 2011 to 2.7 per cent in the current quarter. The improvement in NIMs is primarily due to rise in overseas margins sequentially. Improved overseas margins also aided a sequential growth in profits of 15 per cent.

Strong growth in profits coupled with rising leverage has improved its December quarter's return on equity by a percentage point (annualised) to 11.3 per cent year-on-year.

The gross NPA continued to decline as the company shed its risky unsecured retail business. The gross NPA ratio fell to 3.82 per cent from 4.75 per cent last year . The cumulative restructured assets accounted for only 1.5 per cent of the total advances, which is far lower than the industry average. There may be some additional restructuring expected in the March quarter for ICICI Bank.

>mvssantosh@thehindu.co.in

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