ICICI Bank back on the path of profit growth

The question that investors have been asking ICICI Bank Ltd for the last few quarters has been: When will it return to growth? Well, loans outstanding at the end of the March quarter were 1% higher than at the end of December. The balance sheet has expanded by 2% over the quarter. That’s not much, but profit growth is certainly back, with net profit, at Rs1,006 crore for the quarter, up 35.2% year-on-year. Net interest income, though, was lower than in the year-ago period and profit growth was on account of higher fee income, lower expenses and lower provisions. Nevertheless, after a long pause to put its house in order, is ICICI Bank now in a position to reap the opportunity presented by the economic recovery? The bank management certainly thinks so and in an interview to CNBC-TV18, managing director Chanda Kochhar said that domestic loans have been growing at an annualized rate of 12%. She has said that net interest margin will be maintained. The bank has been able to reduce its costs of deposits, raised its current account and savings account as a proportion of total deposits to a high 41.7% and slashed costs. The Reserve Bank of India has given it time till March next year for increasing its bad loan coverage ratio to 70%. Capital adequacy is high. All that is now needed is loan growth. There is, though, one element of risk. Gross non-performing assets rose to Rs9,627 crore at the end of March, from Rs9,070 crore at the end of December, and after declining steadily for several quarters. ICICI Bank has more or less tracked the BSE Bankex since the beginning of the year. With the bank’s results set to significantly improve, the scrip should beat the Bankex.