On Saturday, India’s ICICI Bank (ICBK.NS) reported third-quarter profits that exceeded expectations, driven by robust loan growth. The bank, which is the country’s second-largest private bank, disclosed a standalone net profit of 102.72 billion rupees ($1.24 billion) for the quarter ending on December 31. Analysts had anticipated a profit of 100.25 billion rupees, according to LSEG data.
Despite the strong performance, ICICI Bank experienced a contraction in its net interest margin (NIM) for the fourth consecutive quarter. The NIM, which represents the difference between interest earned on loans and interest paid on deposits as a percentage, decreased to 4.43%, down from 4.65% the previous year and 4.53% in the second quarter.
Indian banks have consistently reported double-digit loan growth in recent months due to increased demand. However, margins have been squeezed due to rising deposit costs. This trend was evident in HDFC Bank (HDBK.NS), India’s largest private lender, which also reported weak margins for the second consecutive quarter earlier in the week.
ICICI Bank’s total loans saw a year-on-year growth of 18.8%, driven largely by retail loans, while deposits grew by 18.7%. The net interest income, representing the difference between interest earned and paid, increased by 13.4% to 186.78 billion rupees.
The bank’s asset quality improved, with the gross non-performing assets (NPAs) ratio at 2.30% as of the end of December, compared to 2.48% at the end of September.
ICICI Bank made a provision of 6.27 billion rupees for its exposure to alternative investment funds (AIFs) in line with tighter regulations by the central bank. The bank, however, intends to maintain this exposure, expecting returns over time.
Additionally, the bank incurred a 70 basis points reduction in its capital ratio due to higher risk weights on unsecured loans imposed by the Reserve Bank of India. ICICI Bank’s shares closed 1% higher ahead of the results.
