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ICICI Bank Q3 takeaways: Beats across matrix, conservative NPA policy should impress D-Street

MUMBAI – ’s earnings for the quarter ended December is likely to impress investors as the lender surpassed Street’s expectations on most metrics, said analysts.

Earlier today, the lender reported a 19 per cent growth in net profit and 16 per cent rise in net interest income with both the metrics beating Street’s expectations.

The lender’s performance was complemented by the strong growth in loans as well as deposits in the quarter. Deposits in the quarter grew 22 per cent on-year with average current account deposits rising 27 per cent on-year.

Here are the major takeaways from the private sector bank’s earnings:

Better-than-expected operating show

ICICI Bank reported a 15 per cent year-on-year growth in its core operating profit for the December quarter, comfortably beating analysts’ estimate of high single-digit growth in pre-provision operating profit. The performance was helped by a tight leash on costs by the bank as expenses grew merely 3.7 per cent in the quarter.

Conservative NPA recognition policy

ICICI Bank adopted a more conservative policy on recognition of non-performing loans in its loan book, which should further provide comfort to analysts on the asset quality front. The change in policy resulted in higher provision on advances amounting to Rs. 2,096 crore during the December quarter for aligning provisions on the outstanding loans to the revised policy, the bank said.

Net NPA ratio sees uptick

While ICICI Bank’s net non-performing assets ratio contracted sequentially to 0.63 per cent on a reported basis, but not accounting for the Supreme Court’s standstill on bad loans recognition the same stood at 1.26 per cent, up 14 basis points from the previous quarter.

Fee income sees firm sequential recovery

The COVID-19 pandemic has taken its toll on the fee income-based businesses of banks, however, ICICI Bank reported a 15 per cent sequential growth in the segment reflecting the increase in customer spending, borrowing and investment activity.

Strong loan growth bodes well

The private sector lender reported a 13 per cent on-year rise in domestic loans for the quarter with retail loans growing 15 per cent. Retail loans comprised 65.6 per cent of the total loan portfolio at December 31, the bank said. Growth in the domestic corporate portfolio was around 10 per cent year-on-year driven by disbursements to higher rated corporates to meet their working capital and capital expenditure requirements.

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