ICICI Bank (IBN) Q3 Earnings Increase Y/Y, Expenses Rise
Zacks Investment Research | Jan 26, 2020 08:51PM ET
ICICI Bank’s (NYSE: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
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