Profit up as ICICI Bank prepares to grow lending, AS

Fri, Oct 30 01:41 PM

MUMBAI, India (AP) ICICI Bank Ltd., India's largest private bank, said Friday that quarterly profit inched up, as it continued to restructure its deposit portfolio and prepared to start lending more money in the face of rising demand and stabilizing bad loans.

Net profit for the quarter ended September 30 was 10.4 billion rupees ($216.2 million), up slightly from 10.1 billion rupees in the same period last year. Total income fell 12.7 percent, to 84.8 billion rupees ($1.8 billion), from 97.1 billion rupees the same period a year ago.

The bank continued its cost-cutting drive, slashing operating expenses by 8 percent sequentially, to 13.8 billion rupees ($286.9 million). A surge in trading income, to 3.0 billion rupees ($61.7 million) from a loss of 1.5 billion rupees a year ago, also helped profits.

Total deposits again fell, to 2.0 trillion rupees ($41.1 billion) from 2.1 trillion rupees at the end of June, as the bank continued to boost its ratio of low-interest-bearing accounts. Investors in India like banks to have about a third of their deposits in checking and savings accounts, as opposed to fixed deposit accounts, on which the bank must pay much higher interest.

During the quarter, ICICI increased its savings account deposits by 48.59 billion rupees ($1.0 billion), boosting its ratio of low-cost deposits the so-called CASA ratio to 36.9 percent as of September 30 from 30.0 percent a year ago. "The bank has done very well," said Vaibhav Agrawal, an analyst at Mumbai's Angel Broking.

"In terms of low cost deposits, the bank has given a phenomenal performance." In 2007, the ratio was as low as 22 percent, he said.

The loan book again shrank, but managing director Chanda Kochhar told reporters she expected that to turn around soon, predicting single digit loan growth for the fiscal year ending March. Loans outstanding shrank to 1.9 trillion rupees ($39.7 billion) at September end, from 2.0 trillion rupees ($41.2 billion) at the end of June.

The percentage of non-performing assets remained flat sequentially, at 2.19 percent, while provisioning for bad loans fell 19 percent sequentially, to 10.7 billion rupees ($223 million). "Asset quality is stabilizing," Agrawal said.

"Overall, in loans and deposits, there is a degrowth, but it's part of a strategy to improve the quality of the balance sheet and earnings so they are well positioned for the upturn from fiscal year 2011 onwards." Shares closed up 2.38 percent, at 789.6 rupees, on the Bombay Stock Exchange, while the benchmark Sensex index fell 0.97 percent, to 15,896.3 points.

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