ICICI Bank beats sector headwinds with robust Q2
Subscribe to enjoy similar stories. Amid a shortage of deposits, an emerging pain point for the banking sector is the stress in retail and rural segments. Slowdown in FMCG sales and recent earnings of some banks mirror this concern.
In this background, private sector lender ICICI Bank’s standalone September quarter (Q2FY25) result is commendable. The bank has managed the stress in retail and rural portfolio well through aggressive write-off. Net addition (after recoveries and upgrades) to gross NPA of ₹1,754 crore during Q2FY25 came entirely from retail and rural portfolio.
The bank has written off NPAs worth ₹3,336 crore as against ₹1,753 crore in Q1FY25. Higher credit costs pulled down the growth in core profit before tax to 9% year-on-year even though core pre-provision operating profit (PPOP) rose 13% year-on-year (y-o-y) to ₹15,502 crore. Here, core profit refers to profit excluding dividends from subsidiaries, associates etc.
and treasury MTM. Despite healthy year-on-year growth in net advances of 16%, the net interest income rose only 9.5% reflecting the pressure on net interest margin (NIM). Yield on interest earning assets remained steady at 8.63% y-o-y, but cost of funds increased 31 basis points (bps) to 5.09% mainly because of higher cost of deposits.
NIM shrunk by 26 bps y-o-y to 4.27%. The sequential decline in NIM was smaller at 9bps, which shows that NIM has stabilized till there is a turn in the interest rate cycle, according to the bank’s management. Fee income rose by 13% to ₹5,894 crore.
Operating expenses rose 7% as the bank has managed to rationalize some of its costs. One prime example being the reduction in number of ATMs and CRMs from 17,102 to 16,120 sequentially. Consequently, cost to income
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