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ICICI Bank's (IBN) Q3 Earnings Rise Y/Y, Provisions Jump

ICICI Bank’s IBN third-quarter fiscal 2021 (ended Dec 31) net income was INR49.40 billion ($676 million), up 19% from INR41.46 billion ($567 million) in the prior-year quarter.

The company’s shares on the NYSE have rallied 10% in the pre-market trading. A full day’s trading session will provide a better picture.

Results were driven by a rise in net interest income, and growth in loans and deposits.  However, provisions surged owing to coronavirus-related concerns. Also, decline in non-interest income and higher operating expenses were headwinds.

Net Interest Income Up, Expenses Rise

Net interest income rose 16% year over year to INR99.12 billion ($1.4 billion). Net interest margin was 3.67%, down 10 basis points.

Non-interest income (excluding treasury income) was INR39.21 billion ($537 million), down 3% from the prior-year quarter. Fee income, however, increased marginally to INR36.01 billion ($493 million).

Further, treasury income was INR7.66 billion ($105 million), up 44% from the year-ago quarter. During the reported quarter, the company sold 2.2% stake in ICICI Securities, which resulted in gains of INR3.29 billion ($45 million).

Operating expenses totaled INR57.79 billion ($790.89 million), up 4% year over year.

Loans & Deposits Increase

As of Dec 31, 2020, ICICI Bank’s total advances amounted to INR6,990.17 billion ($87 billion), up 10% year over year. Total deposits grew 22% to INR8,743.48 billion ($119.7 billion).

Credit Quality Worsening

As of Dec 31, 2020, net nonperforming assets (NPA) ratio was 1.26%. Recoveries and upgrades (excluding write-offs) from non-performing loans were INR17.76 billion ($243 million) in the quarter. Further, gross NPA additions were INR4.71 billion ($64 billion).

Provisions (excluding provision for tax) rose 32% from the prior-year quarter to INR27.42 billion ($375 million). During the quarter, the company made contingency provision amounting to INR30.12 billion ($412 million) for borrower accounts not classified as non-performing pursuant to the interim order of the Supreme Court. Further, it utilized INR18 billion ($246 million) of Covid-19 related provisions made in the prior quarters.

As of Dec 31, 2020, ICICI Bank held Covid-19-related provision of INR99.84 billion ($1.2 billion).

Capital Ratios Strong

In compliance with the Reserve Bank of India's guidelines on Basel III norms, ICICI Bank's total capital adequacy was 19.51% and Tier-1 capital adequacy was 18.12% as of Dec 31, 2020. Both the ratios were well above the minimum requirements.

Our Take

ICICI Bank’s quarterly performance was decent. Growth in net interest income was a major tailwind, which is expected to support the company's financial performance going forward. However, elevated expenses are likely to adversely impact the bank’s bottom line. Also, coronavirus-induced market mayhem is a major headwind.

ICICI Bank Limited Price, Consensus and EPS Surprise

ICICI Bank Limited price-consensus-eps-surprise-chart | ICICI Bank Limited Quote

ICICI Bank currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.


Performance & Earnings Dates of Other Foreign Banks

UBS Group AG UBS reported fourth-quarter 2020 net profit attributable to shareholders of $1.71 billion, up significantly from $722 million in the prior-year quarter.

HSBC Holdings HSBC and Barclays BCS are scheduled to announce results on Feb 18 and Feb 23, respectively.

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