ICICI Bank Ltd. Q1 FY2025 earnings call

Management Statement and Operational Highlights

• Strategic Focus: Continues to focus on a 360-degree customer-centric approach to grow profit before tax, excluding treasury, through ecosystem and micro market opportunities.
• Loan Growth: Strong growth across segments including retail, business banking, SME, rural, and corporate; international loan portfolio also saw growth.
• P&L Details: Net interest income increased 7.3% YOY to INR 195.53 billion; net interest margin was 4.36%. Noninterest income (excluding treasury) grew 23.3% YOY to INR 63.89 billion. Operating expenses rose 10.6% YOY; employee expenses up 12.5%, nonemployee up 9.2%; technology expenses were 9.3% of operating expenses. Branch count increased by 64 to 6,587 branches.
• Digital Offerings: Launched SmartLock, with 71% of trade transactions done digitally and trade online platform volume up 21.5% YOY.
• Subsidiaries: Consolidated profit after tax grew 10% YOY to INR 116.96 billion; subsidiaries like ICICI Life, ICICI General, etc., had improved financial performance.

Segment Performance

• Profit Metrics: Profit before tax, excluding treasury, grew 11.8% YOY to INR 140.80 billion. Core operating profit increased 11% YOY to INR 154.12 billion. Profit after tax grew 14.6% YOY to INR 110.59 billion.
• Deposits: Total deposits grew 15.1% YOY and 0.9% sequentially at June 30, 2024. Term deposits increased 19.9% YOY and 3.1% sequentially. Average deposits grew 17.8% YOY and 3.3% sequentially; average current and savings account deposits grew 9.7% YOY and 5.1% sequentially.
• Loans: Domestic loan portfolio grew 15.9% YOY and 3.3% sequentially. Retail loan portfolio grew 17.1% YOY and 2.4% sequentially (46.3% of total portfolio). Business banking portfolio grew 35.6% YOY and 8.9% sequentially. SME portfolio grew 23.5% YOY and 4% sequentially. Rural portfolio grew 16.9% YOY and 3.4% sequentially. Domestic corporate portfolio grew 10.3% YOY and 3.1% sequentially. Overall loan portfolio (including international) grew 15.7% YOY and 3.3% sequentially.
• NPAs: Net NPA ratio was 0.43% at June 30, 2024. Gross NPAs additions were INR 59.16 billion. Recoveries and upgrades from gross NPAs (excluding write-offs and sales) were INR 32.92 billion. Total provisions during the quarter were INR 13.32 billion. Provisioning coverage ratio on NPAs was 79.7%. Contingency provisions stood at INR 131 billion.
• Capital: CET1 ratio was 15.92% and total capital adequacy ratio was 16.63% at June 30, 2024.

Guidance

• Growth Focus: Aim for risk-calibrated profitable growth via Customer 360 approach, franchise strength, and technology investments.
• Balance Sheet: Remain focused on maintaining a strong balance sheet with prudent provisioning and healthy capital levels.
• Opportunities: See opportunities in various segments and will continue to invest in technology, people, distribution, and brand to deliver holistic customer solutions.

Risks

• Deposit Market: Potential impact of tight deposit rates and market dynamics on lending.
• Competitive Pricing: Intense competition in lending, especially in corporate and retail segments.
• Regulatory Changes: Implications of revised LCR guidelines on balance sheet management.
• Penal Charges: Impact of penal charges circular not quantified.
• Recoveries/ Credit Costs: Gradual normalization of credit costs expected, with potential volatility in recoveries.

Question and Answer

• Q: On deposit and loan growth, comfort with loan growth target, LDR A: Deposits growing comfortably, lending opportunities available; LDR likely to remain in low-mid 80s, with no major constraint on lending due to deposit flows.
• Q: Cards portfolio asset quality, credit cost A: Cards less than 5% of loan book; credit cost expected to normalize gradually, with focus on growing the cards business.
• Q: Yield on advances decline A: Impact of nonaccrual in Kisan credit card portfolio; competitive pricing in corporate side contributing to yield movement.
• Q: Borrower demand strong, raw material cost up, why not pass on to borrowers A: Competitive intensity in corporate and mortgage markets; focus on prime customers, leading to stable yields in competitive segments.
• Q: Impact of penal charges circular, recoveries, branch expansion A: No quantified impact on penal charges; recoveries steady with gradual credit cost normalization; no change in branch expansion plan.