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ICICI Bank Q3 FY20 Results Highlights

Introduction

In this article, we will analyse ICICI Bank quarterly results update. Private sector lender ICICI Bank as posted 158% YoY rise in Q3 FY20 Net profits driven by lower provisions and recoveries from Non Performing Assets (NPAs).

ICICI Bank Q3 FY2019-20 Results Update

Q3 FY2019-20 Results Analysis

• Net Interest Income (NII) of bank is increased by 24% YoY and 6% QoQ driven by :
  • Growth in advances of 12.6% and deposit growth of 18.1%
  • Consistently improving Net Interest Margin of 3.77% for Q3 FY20
• Operating profit is increased by almost 23% YoY and 9.8% QoQ on account of :
  • Increase in Balance sheet size by 10% YoY
  • Rise in efficiency of bank YoY (Slightly Improved cost to income ratio YoY)
  • Operating Income growth 22% YoY
• Net profit rise of almost 158% YoY in Q3 FY20 is mainly due to
  • Corporate tax rate cut
  • Provisions declined by 51% to Rs.2,083 Cr due to one time gain from Essar Steel Resolution
  • Operating Profit growth 23% YoY

Q3 FY20 Balance sheet Summary

• Balance sheet size of ICICI Bank has crossed Rs.10 Lakh Cr milestone in Q3 FY20. Balance sheet size has reached to Rs.10.07 Lakh Cr in Q3 FY20, which is increased moderately 4.4% YoY and 1% QoQ.
• Total Advances and Total Deposit growth were also steady with a year on year growth of 12.6% and 18% respectively.
• Since Deposits growth is greater than advances growth, the bank is having enough room for further advances growth without raising funds externally. Thus, the cost of funds has been reducing sequentially in Dec-19 QoQ as well as YoY.

Key Ratios

Improved Asset Quality

• The asset quality of the bank has improved sequentially with Gross non-performing assets (Gross NPAs) fell to 5.95% in Q3 FY20 from 7.75% last year in Q3 FY19 and 6.37% last quarter Q2 FY20. Gross NPAs are as a percentage of gross advances.
• While Net NPAs declined to 1.49% in Q3 FY20 from 2.58% in Q3 FY19 and 1.60% in Q2 FY20.
• The improvement in the asset quality is mainly on account of :
  • One time gain from Essar Steel Resolution
  • Better recoveries and upgrades in Q3 FY20
• With the consistent improvement in the asset quality of ICICI Bank YoY as well as QoQ, Bank’s profitability is expected to boost in coming quarters.

CASA Ratio

• CASA Ratio reduced to 39.5% from 40.7% last year and improved slightly from 39.2% last quarter.
• The fall in CASA ratio is on account of following factors :
  • Total deposits have grown by 18% YoY and 4.5% QoQ, the contribution of CASA deposits in the total deposits was with comparatively lower growth rate, at 12.4%.
  • The share of Time deposits is higher, 53% and it has increased at a very good growth rate of 24% YoY, higher than even the growth rate of total deposits (18%)
  • It indicates total deposits are increased mainly on account of Term deposits.

Capital Adequacy Ratio (CAR)

• ICICI Bank’s total Capital Adequacy Ratio (CAR) as per Basel III guidelines was at 16.5% as on December 31, 2019 from 17.15% as on September 30, 2019. CAR is well above the regulatory requirement level given by RBI.
• CAR has improved to 18.5% in Q3 FY20 from 16.14% in Q3 FY19.

Net Interest Margin (NIM)

• Net Interest Margin (NIM) and the asset growth, both drives the Net Interest income of the bank.
• NIM for the quarter Q3 FY20 improved to 3.77% from 3.64% in Q3 FY19 and 3.40% in Q2 FY20.
• Interest expenses in Q3 FY20 has seen a moderate growth of 0.1% QoQ and 12% YoY, which also contributed to the improved NIM for Dec-19 quarter. On the other hand, Interest income has grown with higher rate of 17% YoY and 3% QoQ.

Cost to Income Ratio

• For Q3 FY20, the Cost to Income Ratio improved to 42.5% from 43.9% in Q3 FY19 and from 42.9% in Q2 FY20.
• Cost to income ratio of any bank tells how much cost is incurred to generate operating income of Rs.100 for the bank. The improvement in the cost to income ratio of ICICI bank in Q3 FY20 indicates :
  1. The rise in operational efficiency of the bank
  2. Increased profitability as compared to Q3 FY19 & Q2 FY20