ICICI Bank surges 7% on six-fold jump in profit for September quarter

Shares ICICI Bank leapt 7 per cent to Rs 418.65 on the BSE on Monday after the lender reported six-fold jump in standalone net profit at Rs 4,251 crore in quarter ended September 2020 (Q2FY21) on account of growth in net interest income (NII) and lower credit cost as the bank did not make Covid-related provisions. It had posted a net profit of Rs 654.9 crore in the July-September 2019 (Q2FY20).

The bank's net interest income (interest income minus interest expended) grew 16 per cent to Rs 9,366 crore in Q2FY21 from Rs 8,057 crore. However, the Net Interest Margin (NIM) saw a dip to 3.57 per cent in Q2FY21 as against 3.64 per cent in Q2FY20. Sequentially, NIM was at 3.69 per cent in Q1FY21.

The bank's assets quality improved with gross non-performing assets (NPAs) declined to 5.17 per cent in September 2020 from 6.37 per cent in September 2019. The net NPAs declined to 1.0 per cent from 1.6 per cent.

According to the analysts at Jefferies, the key positive in the results was that the bank did not set aside provisions for additional Covid-related stress; provisions were made for NPL only (recognised or on standstill). The level of loan collection and management's outlook on asset quality also indicate that the bank is well covered with the current level of provisions (1.5 per cent of loans).

Management clarified that in most retail segments, the level of collection has reached 97 per cent of pre-Covid levels and corporate overdues are just 3 per cent of loans. Hence, the level of restructuring should be relatively small, analysts said.

Level of collection & management commentary was reassuring that buffer provisions (1.5 per cent of loans) will be adequate. This helped to improve ROA to 1.5 per cent and thus FY22-23 profitability should be close to normalcy. Pick-up in Casa growth (12 per cent) should aid faster loan growth. The brokerage firm has raised its earnings estimates to factor in better top line and faster normalisation of credit costs. With valuations at 1.3x FY22E adjusted PB, risk-reward is quite favourable given the backdrop of asset quality trends, it said.

At 09:23 am, ICICI Bank was trading 6 per cent higher at Rs 415 on the BSE, as compared to 0.08 per cent rise in the S&P BSE Sensex. The counter has seen huge trading volumes with a combined around 16 million shares changing hands in first 10 minutes of trade on the NSE and BSE.