MUMBAI: ICICI Bank, the country’s second-largest lender, has reported a 32.8% rise in net profit on the back of higher interest income, although the bank’s portfolio of bad loans swelled considerably during the second quarter of this fiscal. Net profit for the quarter ended September 30, 2007 rose to Rs 1,002.6 crore from Rs 755 crore compared with a year ago.
For the first half of this fiscal, ICICI Bank has reported a 29.3% rise in net profit at Rs 1,777.7 crore from Rs 1,375 crore. The gross non-performing assets of the bank have doubled to Rs 5,931.5 crore while net non-performing assets rose by 96% to Rs 2,970.9 crore. Incidentally, the bad loans are more than the gross and net non-performing assets figure for the last fiscal, which were at Rs 4,126 crore and Rs 1,992 crore, respectively. The rise in bad loans has been on account of delinquencies in the loan portfolio of the bank, especially in personal loans and credit cards, where there is no recourse to any collateral. ICICI Bank had forayed into this segment aggressively given the high margins. But typically, such business segments pose severe risks which seem to have impacted the bank now.
On a percentage basis, gross NPAs rose to 2.8% from 1.9%, while net NPAs have risen to 1.4% from 1% the previous fiscal. According to ICICI Bank CFO Vishakha Mulye, the bank has seen a rise in its lending on non-collateralised loans. This has increased from sub-10% of the retail portfolio to 15% of the portfolio. Even though interest rates on these products are high, the delinquencies are also higher. However, compared with the first quarter, the net NPAs have risen by Rs 250 crore. The total income rose 41% to Rs 9,588.4 crore from Rs 6,796.8 crore on the back of a rise in interest income. Interest income rose 43.8% to Rs 7,516.5 crore from Rs 5,226.7 crore and other income rose 31.9% to Rs 2,072 crore from Rs 1,570.1 crore. Fee income of the bank rose 25% to Rs 1,486 crore, while lease and other income showed a sharp spurt of 183% to Rs 411 crore. However, treasury income dropped 27% to Rs 175 crore. The bank had a $1.5-billion portfolio of credit linked notes.
Close to 70% of this constituted Indian credit, with the remaining being institutional credit. Because of the subprime crisis, the bank had to make provisioning which resulted in a drop in treasury income. Interest expenses rose 47.2% to Rs 5,730.5 crore. The net interest margins of the bank have risen to 2.3% from 2.1%. The NIM for the first quarter was at 1.9%. Shares of the bank fell marginally by 1.42% to Rs 1,024.05 on the Bombay Stock Exchange on Friday. Total advances rose 33% to Rs 2,07,121 crore on September 30, 2007. The advances of the bank’s international branches were up 146% to Rs 36,994 crore. With this the proportion of advances of the bank's international branches in total advances rose to 17.9% from 9.7%. The bank’s retail advances at Rs 1,31,014 crore constituted 63% of total advances. Advances to the small and medium enterprises segment increased 56% to Rs 5,205 crore.
Deposits were higher by 20% to Rs 2,28,307 crore. The capital adequacy ratio of the bank is now 16.7%. ICICI Bank UK’s net profit for the half year was at $36 million. Ms Mulye added that the group had invested Rs 600 crore into the insurance ventures in the first quarter of this fiscal. According to a banking analyst at a local brokerage firm, on a quarterly basis, the bank has not lent much. While current tax payments stand at Rs 418 crore, on a tax-adjusted basis, the tax liability has gone down by Rs 178 crore. If this tax-adjustment is taken off, the profit after tax has actually risen only by 9% on a Y-o-Y basis and a mere 6% on a quarterly basis.
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