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.
