ICICI Bank's net profit for the second quarter surged by 36% year-on-year (YoY) to Rs 10,261 crore ($1.38 billion), bolstered by a higher core income and reduced provisions. The bank also reported a return on assets of 2.4%, according to an announcement made today. This is higher than the 1.27% return on assets reported by InvestingPro for the last twelve months (LTM2023.Q3).
The bank's net interest margin (NIM) dipped to 4.53% in the third quarter due to deposit repricing. Morgan Stanley predicts that the bank's margin will normalize above pre-Covid levels, attributed to disciplined pricing and an improved loan mix. This includes a high-yielding unsecured portfolio and increased traction in the retail and small and medium enterprises (SME) segment.
ICICI Bank's net interest income rose by 24% YoY to Rs 18,308 crore ($2.46 billion). The asset quality also improved with the gross non-performing asset ratio decreasing by 28 basis points quarter-on-quarter to 2.48%, while the net NPA ratio advanced by 5 basis points sequentially to 0.43%.
The bank managed to maintain ultra-low credit costs due to higher corporate recoveries and recoveries from written-off accounts. An additional COVID-related provisioning buffer of 1.2% of loans provided further assurance. This aligns with InvestingPro Tips that highlight the bank's consistent increase in earnings per share and the fact that it has raised its dividend for 3 consecutive years, suggesting a strong financial position.
Growth in deposits and loans was spearheaded by higher-yielding segments, and the bank is accelerating its branch expansion. Despite a reduction in Rural Infrastructure Development Fund (RIDF)-)-related investments, business diversification continues through SME and secured retail traction. This is in line with InvestingPro's data showing a strong operating income margin of 42.42% for the last twelve months (LTM2023.Q3).
Bernstein Research has maintained a 'market-perform' rating for ICICI with a target price of Rs 1,050 ($14.12). Meanwhile, Motilal Oswal Securities forecasts a return on assets of 2.3% in FY25 and a moderate profit after tax (PAT) growth rate of 15–16% over FY25 and FY26. The firm has given ICICI a 'buy' rating and revised the target price to Rs 1,120 ($15.06).
For more insights, consider exploring InvestingPro's premium offerings, which include access to additional tips and real-time metrics. Currently, there are 15 additional tips listed on InvestingPro for ICICI Bank, providing a comprehensive analysis of the bank's performance.
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