ICICI Bank Q4FY24 Earnings

ICICI Bank Ltd. – Q4FY24 Result Analysis

Sector Outlook: Positive

Asset quality remains healthy

In the fourth quarter of the financial year 2024, ICICI Bank reported a Net Interest Income of Rs. 19,093 crores, which is an 8% increase from last year and slightly above what analysts predicted due to strong loan growth. The bank’s operating profits before provisions were Rs. 15,039 crores, up by 8.8% compared to last year. The bank made less money set aside for bad loans, decreasing to Rs. 718 crores from higher amounts in previous quarters. Its net profit reached Rs. 10,708 crores, a 17.4% increase year-over-year, surpassing expectations. The Net Interest Margin, a key profitability indicator, was 4.40%, mainly supported by growth in retail and small business sectors. Bad loans have decreased, improving the bank’s asset quality. Deposits grew by 19.6% to Rs. 14,12,825 crores, and loans grew by 16.2% to Rs. 11,84,406 crores. The percentage of low-cost deposit accounts rose to 42.2%, contributing to the bank’s healthy financial outcome.

Key Concall Highlights

  1. The bank is concentrating on increasing its operating profits after accounting for money set aside for bad loans.
  2. In the recent quarter, the bank adjusted its lending criteria and sourcing costs, which led to fewer personal loans being given out.
  3. Going forward, the bank will stick to its strategy, paying close attention to specific local markets.
  4. Management emphasised the importance of robust IT systems and customer security, stating that budget limitations will not affect spending in these areas. In fact, IT and cybersecurity spending has risen from 5.6% to 9.4% of total expenditures this fiscal year.
  5. The bank expects its Net Interest Margins (NIMs) to stay within a certain range, influenced by seasonal cost changes and potential adjustments in the central bank’s repo rate. They anticipate only a minor rate cut from the central bank.
  6. The bank plans to continue adjusting deposit pricing in the next quarter.
  7. Growth strategies include adjusting interest rates charged to customers and improving funding costs. Geographic and product-specific tactics will also be used throughout the year.
  8. Management mentioned that they have approval to raise capital and will seize opportunities as they arise, planning to raise Rs. 25,000 crores in India and USD 1.5 billion internationally.
  9. The bank uses a detailed approach to open new branches in targeted local markets and opened 623 branches this year, with plans to open a similar number next year.
  10. The bank had Rs. 77,000 crores loaned out to Non-Banking Financial Companies (NBFCs) and Housing Finance Companies (HFCs), making up 6.5% of all loans as of March 2024.
  11. Deposit growth was strong, and the bank aims to provide comprehensive support to its customers.

Valuation and Outlook

ICICI Bank, India’s second-largest private sector bank, reported strong results for the fourth quarter of FY24. Like many Indian banks, ICICI has been working to increase its deposits due to a tight money market and high loan demand, which usually reduces profit margins. However, ICICI managed this pressure well, thanks to growth in high-profit areas. The bank also reduced the money set aside for potential bad loans due to fewer loan defaults, showing effective risk management. Its deposits grew nicely, with checking and savings accounts doing well, though fixed deposits grew the fastest. Despite high interest rates, the bank kept its profit margins stable and expects them to stay that way unless the central bank changes interest rates. ICICI is also enhancing its digital lending platform, “iLens,” and focusing on rural areas where it can sell more services through its extensive branch and ATM network, which should keep its performance strong.

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