ICICI Bank Ltd Quarterly Results Update

Net Interest Income stood at Rs. 18,227 crores in Q1FY24, showing a growth of 3.2% QoQ / up 38.0% YoY and beating street estimates of Rs. 17,900 crores. Pre-provision operating profit (PPOP) stood at Rs. 13,887 crores in Q1FY24, showing a marginal growth of 0.2% QoQ / up 35.2% YoY. Provisions declined to Rs. 1,292 crores in Q1FY24 from Rs. 1,619 crores in Q4FY23 and Rs. 1,144 crores in Q1FY23. The bank’s quarterly net profit of Rs. 9,648 crores in Q1FY24 was up 5.8% QoQ / up 39.7% YoY, beating market expectations of Rs. 9,200 crores.

NIM stood at 4.78% in Q1FY24, down 12bps QoQ / up 77 bps YoY. Gross NPA stood at 2.76% in Q1FY24, down 5bps QoQ / down 65 bps YoY. Net NPA stood at 0.40% in Q1FY24, similar to Q4FY23 levels and down 22 bps YoY. The Cost to Income ratio stood at 40.2% in Q1FY24, up 100 bps QoQ / up 210 bps YoY. One of the reasons for such an increase was a one-time expense for retirement benefit obligations on a conservative basis. Gross Deposits showed a decent growth at Rs. 12,38,737 crores in Q1FY24, up 4.9% QoQ / up 17.9% YoY. Gross Advances stood at Rs. 10,57,583 crores in Q1FY24, up 3.7% QoQ / up 18.1% YoY on account of healthy growth from its business banking and SME portfolio. CASA declined to 42.60% in Q1FY24 from 43.60% in Q4FY23 and 45.80% in Q1FY23.

Key Concall Highlights

• The bank’s strategic focus continues growing its core operating profit – less provisions, i.e., profit before tax, excluding treasury gains, through the 360-degree customer-centric approach and by serving opportunities across ecosystems and micro-markets.
• The bank continues to enhance digital offerings and platforms to onboard new customers’ manners seamlessly, provide them with end-to-end digital journeys and personalised solutions, and enable more effective data-driven cross-sell and up-sell.
• There have been more than 10 million activations of iMobile Pay by non-ICICI Bank account holders at the end of June 2023 and about 2,30,000 registrations by non-ICICI bank account holders on InstaBIZ till June 30, 2023.
• The sequential increase in the outstanding to NBFCs and HFCs was mainly due to disbursements to entities having long vintage and entities owned by well-established corporate groups.
• The bank is continuing its trend since the past two quarters where a 30 bps QoQ increase in the cost of funds has been seen. Further, the management expects the cost of funds to continue increasing for the next couple of quarters.
• Despite the unsecured loan portfolio growing at a faster pace than the secured loan portfolio, especially in the housing loan segment, the bank is confident about its asset quality and does not expect any slippages.
• The bank’s NIM compression was comparatively less as it was partially set off by the increase in yield on advances that benefited from the last repo hike in Q4FY23 and the increase in the yield of investments which increased due to the repricing of the floating rate bond portfolio.

Valuation and Outlook

India’s second-largest private sector bank ICICI Bank reported impressive Q1FY24 results,

beating market estimates significantly. Although there was nominal NIM compression seen, this was totally absorbed by treasury gain and fee income which the bank generated and exceeded the profit estimation. The bank has a well-calibrated risk framework which helped it to sustain a healthy asset quality and capital adequacy ratio. It is worth noting that the bank through its aggressive focus on the adoption of digitisation activated more than one crore non-ICICI Bank account holders in end-June 2023 through iMobile Pay. 

The bank has been drawing down from surplus liquidity on the balance sheet so far, but it has now turned a bit more aggressive on deposit acquisition recently. We feel the bank’s focus on rural lending with the opportunity of cross-selling products through a network of 6,074 branches, 16,731 ATMs and cash recycling machines will help the bank to continue reporting strong profit going forward