India’s second-largest private sector lender ICICI Bank on July 25 reported Q1 FY21 profit at Rs 2,599.1 crore, a growth of 36.2 percent year-on-year backed by some stake sale in general and life insurance subsidiaries. But the additional COVID-19 related provisions of Rs 5,550 crore limited the profit growth.
Net interest income during the quarter increased by 20 percent to Rs 9,280 crore compared to the corresponding period of the previous fiscal, with loan growth of 7 percent and strong deposits growth of 21 percent YoY. Domestic loan book grew by 10 percent in June quarter with retail loan portfolio growth at 11 percent, while growth in the performing domestic corporate portfolio was about 8 percent YoY, the bank said in its BSE filing.
The net interest margin was 3.69 percent in Q1FY21, falling from 3.87 percent in March quarter but increased 8 bps YoY, reflecting the higher liquidity with the bank due to strong deposit inflows and limited credit demand due to the lockdown, ICICI Bank said.
Here are the highlights from the company’s Q1 FY21 earnings call, as compiled by Narnolia Financial Advisors
Management Participant: Sandeep Bakshi- MD
The bank is looking to reduce the concentration risk and improve the credit ratings in the corporate portfolio. Proposed capital raise is aimed to further strengthen the capital of the bank. The bank is seeing enough opportunities for private banks going forwards and wants to be well capitalised because of it. It does not have any loan growth target for the year but will look to do short- term lending and will continue to explore. Wherever the underlying credit risk and return is favorable they will lend.
The bank has considered Rs 14,368 crore for computation on provision coverage ratio, out of which, Rs 8,275 crore is for COVID-19. General provision on standard assets is Rs 4,185 crore and Rs 1,398 crore is for Non-fund based outstanding to NPA. Other provisions worth Rs 510 crore are on standard asset. Moratorium for the book stands at 17.5 percent from 30 percent in Q4 FY20. About 90 percent of the portfolio under moratorium at June end comprises loans that were also under moratorium at May end. Commercial vehicle loans and builder loans have higher percentage of moratorium. There is no opt out category since June 2020. Moratorium may go up as customers who had opted in Q4 FY20 are still in overdue category, the management said.
According to the management of ICICI Bank management, 60 percent of the CV book is from long vintage customers who are well seasoned with the business cycle. NBFC and HFC form 5 percent of the total loans. Top 20 percent of customers of the CV portfolio comprise only of 3 percent of the portfolio. Disbursement across the retail products have picked up in June from the April and May levels. Incremental sourcing during the quarter was to the existing customers of the bank. 70 percent of the mortgage portfolio is home loan and LAP is 17 percent. 70 percent of the mortgage customers have liability relation with the bank. LTV for home loan and LAP is 65 percent, 55 percent respectively. Auto loans disbursements volume in June have reached about 65 percent of the pre-COVID levels. 80 percent of the auto loan portfolio comprises of new vehicles and 13 percent is used vehicle.
Personal and credit card comprises of 9 percent of the total loan book out of which 80-85 percent customers are salaried and 75 percent of them are employed with well-rated corporates MNCs and government entities and 97 percent of the customers who have availed moratorium continue to get salaries credited. Credit cards spend for the bank is 65 percent of the pre-COVID level. Credit card spends in June was higher by 79 percent compared to the average for April and May. 85 percent of the business banking portfolio has a collateral cover of more than 100 percent, the management added.
On additional provisioning front on account of COVID-19 bank said they have made sufficient provisions considering the base case scenario but will have to look at the situation as the economy opens up. There is no incremental stress in the overseas book during the quarter. Bank expects a significant reduction in the overseas portfolio during the year as they are non-core to banks overall strategy. Increase in employee expenses indicates the retirement provisions made. Cost to income ratio for the bank before the stake sale is 37 percent. The cost is expected to rise as the economy opens up as most of the cost reduction is related to business, it added.
