Stocks
Result analysis 3QFY11: ICICI Bank, HDFC Bank

Asset quality was a big positive for both banks—no new slippages for ICICI Bank, lower slippages for HDFC Bank

ICICI BANK

  • Both NII and profit came in at the higher end of expectations.
     
  • Slight pick up in loan growth and good asset quality were key positives, but slower CASA growth was a disappointment.
     
  • Staff costs were higher due to a rise in number of employees and salary hikes—this was also the main reason for a 26% rise in operating costs.
     
  • Slippages were down and as a result provisions declined by 54% year-on-year. Has achieved RBI’s NPL coverage norm of 70%.
     
  • Loans grew by 15% year-on-year and 6% quarter-on-quarter—still catching up with competition. Out of total loan growth, the corporate segment was up 57%.
     
  • NII growth of 12% was mainly driven by asset growth.
     
  • CASA growth moderated.

 

  • Corporate and international make up for more than 50% of ICICI’s loan book while home loans account for 66% and auto about 26%. The rise in corporate loans augurs well for fee growth (note than ICICI is a leader in the loan syndication business).

 

ICICI Bank Q3 FY11 Result Highlights

(Rs million)

Dec 09

Sept 10

Dec 10

Net interest income

20,581

 22,044

 23,117

Employee expenses

4,270

 6,243

 7,605

Provisions

10,022

 6,411

 4,643

Net profit

11,011

 12,363

 14,370

NIMs %

2.6

2.6

2.6

Gross NPAs (Rs billion)

89

 98

 102

Gross NPLs %

4.8

5

4.8

 ICICI Bank shares have not done well over a three-month period and have been falling after declaring results along with the rest of the market. However, in a six-month period, they have still outperformed the Sensex.

 

HDFC BANK

  • Both net profit and NII came in at the higher end of expectations.
     
  • NIMs came off a bit but NII growth was helped along by loan growth at 33% year-on-year. However, quarter-on-quarter loan growth was modest (just 1%) due to repayment of short-term corporate loans.
    Deposit growth was 24% on year but -2% on quarter.
     
  • CASA ratio was stable at 51% but the management hinted at pressure on this.
     
  • Asset quality continued to improve.
     
  • In total loans, share of retail loans rose to 56% from 52% in Q2 but the share of secured loans is rising and this will cushion against potential asset quality risks.
     
  • Branch opening is putting some pressure on expenses. The bank opened 15 branches and 400 ATMs in 3QFY11 taking the total branch network to 1,780 branches and 5,121 ATMs. The management indicated that 4Q would see a rise in the number of branches as most of them are nearing completion.

HDFC Bank Q3 FY11 Result Highlights

(Rs million)

Dec 09

Sept 10

Dec 10

Net interest income

22,239

 25,263

 27,767

Employee expenses

5,786

 7,106

 7,251

Provisions

4,477

 4,545

 4,659

Net profit

8,185

 9,121

 10,878

NIMs %

4.3

4.2

4.2

Gross NPAs (Rs billion)

19,741

 18,412

 17,818

Gross NPLs %

1.6

1.2

1.1

 HDFC Bank shares have not done well over a three-month period and have been falling after declaring results along with the rest of the market.

User

COMMENTS

Ashish

6 years ago

For Author : Pls confirm the Gross NPAs (Rs billion)
mentioned for ICICI and HDFC , whether the figures given in I bank is 3 digits and in HDFC is 5 , indicates high book size of HDFC?

REPLY

Munira

In Reply to Ashish 6 years ago

Dear Ashish,

Thanks for pointing out the error. The figures for ICICI Bank are in Rs bn and for HDFC Bank in Rs mn. Apologies.

Regards,

Munira

Friday’s Market Preview: Range-bound opening likely

The domestic market is likely to open range-bound on tepid cues from the global arena. The US markets closed with marginal gains on Thursday on mixed economic news while the Asian pack is largely in the red in early trade on Friday as investors were jittery ahead of earnings reports from major corporates and a cut in Japan’s credit rating by Standard & Poor’s. The SGX Nifty was down 18 points at 5,612 from its previous close of 5,630.

Back home, Binani Cement, Havells India, ONGC, Oriental Bank of Commerce and Siemens, among others will announce their quarterly results today.

Yesterday, the market opened higher on better-than-expected quarterly data announced by some corporates and optimism from the Asian markets. The banking sector, which was the top loser on Tuesday, witnessed some buying in early trade. However, selling pressure soon led the key indices into negative territory. A marginal rise in the weekly food inflation figures also added to the woes. Volatility was associated with the expiry of the January futures and options (F&O) contract. Selling became intense in post-noon trade, dragging all the sectoral gauges into the red and closing lower for the second day in a row.

The Sensex finally ended 285 points down to close at 18,684 and the Nifty fell 83 points to close at 5,604. Thursday’s fall has broken the past week's low, hitting a new four-month low. The decline takes the market in the bear market territory. The next supports are at 5,550 on the Nifty and 18,500 on the Sensex, after which we may witness a pre-budget rally.

The US markets closed with marginal gains overnight on mixed economic news. The index of pending home resales rose 2% in December, more than forecast, after a 3.1% gain the previous month. A report from the Labor Department showed applications for jobless benefits increased by 51,000 to 454,000 in the week ended 22nd January. Besides, orders for durable goods fell 2.5%, weighed by volatility in demand for commercial aircraft, a report from the Commerce Department showed. Excluding transportation, bookings increased 0.5% after a 4.5% jump in November.

Among corporates, Qualcomm, Caterpillar Microsoft posted better-than-expected results, while AT&T and Proctor & Gamble disappointed.

The Dow gained 4.39 points (0.04%) at 11,989.83. The S&P 500 added 2.91 points (0.22%) at 1,299.54. It was the highest close since 28th August 2008, when it last finished above 1,300. The Nasdaq advanced 15.78 points (0.58%) at 2,755.28.

Markets in Asia were mostly lower in early trade this morning as a cut in Japan’s credit rating by Standard and Poor’s, which cited persistent deflation and political gridlock as reasons for the rating cut. Cautiousness ahead of earnings report from key heavyweights across the region also weighed on investors.

The Shanghai Composite declined 0.55%, the Hang Seng shed 0.07%, the KLSE Composite was down 0.29%, the Nikkei 225 fell 1%, the Straits Times declined 0.05% and the Seoul Composite lost 0.60%. On the other hand, the Taiwan Weighted gained 0.15%.

Meanwhile, the Indian economy is likely to grow by 8.7% annually and generate 3.75 crore jobs by 2020 on the back of investments in skills and infrastructure, a report by Accenture said.

Accenture, a global consulting firm, in its report released at the World Economic Forum at Davos added that four major economies—India, Germany, US and UK—together account for nearly two-fifths of the world economy.
 
It said that India’s economy would annually grow by “8.7%, compared to 8% expected currently; 37.5 million (3.75 crore) more jobs in 2020 than currently expected".

According to the Reserve Bank of India’s projections, the economy could record a growth of over 8.5% in the current fiscal, up from 7.4% in the 2009-10. During the first half of 2010-11 the economy recorded a growth rate of 8.9%.

 

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