India Bank Earnings: A 20% rise in revenues for ICICI Bank, Asset quality upside not enough (Q2: FY2014)

English: Mukesh Ambani's house "Antilia&q...

English: Mukesh Ambani’s house “Antilia” in Mumbai. Deutsch: Antilia – das Haus des indischen Milliardärs Mukesh Ambani in Mumbai, Indien (Photo credit: Wikipedia)

ICICI Bank which has continued on a lower margin growth in retail to gain just 20% topline growth will still be growing at more than 20% a year. Net Profits also grew to scale as Domestic NIMs were a tremendous 3.65% and the International Book started growing again. India’s largest Private Bank in true banking paradigms neither government owned nor still counting down to respectable CASA despite having started as a division of a Project Finance Firm, it has beaten competition from HDFC Bank in many categories except in true reach and has a real corporate book and fails in comparison with HDFC Bank’s large retail share. It’s book is predominantly mortgages in retail and its lending practices imply a bigger concern on asset quality n that portfolio as well.

Investments are more than a quarter of the Gross Interest earned after the likely HTM transfers and booked losses and  with International ‘cash’ also being put to use. Fee Income was up 20% sequentially to INR 24 Bln and 15% up on half year over FY13 as the bank seemingly wins the war for customer yield while rearing up growth, a quick way to kill criticism of its retail lending practices that will sooner than later rear up but without a margin squeeze , does not get into ‘crisis mode’ again

Net was iNR 23.5 Bln and retail credit grew at 22% with the Corporate Book also growing at above 15%. September Banks’ non food credit has grown to 18% above the 13% rate most of FY13 and will this be a good momentum for the Bank’s continuing growth. ICICI’s under 20k ATMs (19500) are same as HDFC Bank and in almost unreachable urban areas across the spectrum of SEC income classes and provides a substantial part of its retail lending book in unsecured loans , a practice missing in private Sector Indian banks. Organic portfolio grew at 27% but the need to purchase retail portfolios is only going to grow. The bank will also need to scale up outside townships as one of the two active private sector players needed to contibute to rural reach as India battles a large more than 50% nbanked population and a changing welfare regime

It suffers from a just short of INR 100 Bln in restructured assets (including current disclosed pipeline ) by FY15 and will be a significant 3-4% of the Advances and will mostly be seen as heading to NPA than to normal assets after the two years except for one or two cases that will go back after the currency stabilises, the business model still safe

The ratio of Gross NPAs though down is another mind furrowing and disturbing biggie at over 3% and NPAs wmore than twice of rival HDFC Bank ut comfortably under 1%.  The banks’ leading growth as a multiple of GDP and thus growing at more than 15%, ICICI Bank’s  Loan growth will remain close to 20% for the growth cycle as Taper is postponed and India tries to regain a better growth clip

Lifestyle Champ ITC , here or there?

ITC improved EBITDA margins to 40% in the meantime on price realisations in Tobacco even as profits from Hotels halved and FMCG returned to successive second quarter of losses ( of INR 120 mln). Net Sales were INR 77 Bln , 33 Bln from cigarettes and INR 26 Bln from consumer staples

RIL loses buyback steam

What will also reach India Morning repots next week though just a quick plug here is that Mukesh Ambani’s firms have decided to extinguish existing Treasury stock of almost INR 500 Bln and will be discontinuing buybacks

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3 thoughts on “India Bank Earnings: A 20% rise in revenues for ICICI Bank, Asset quality upside not enough (Q2: FY2014)

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