Outperformance across All Growth Parameters – ICICI Bank Q2 FY22 Concall Highlights

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Economic Outlook:

  • Festive season and good monsoon saw an uptick of demand throughout the economy.
  • Management expects the upcoming festive season to bring better H2 for Corporate India.
  • The level of economic activity saw an increasing trend in Second Quarter. This was on the back of robust industrial activity indicators such as power demand, GST collections, rail freight revenues, e-way bill generation, higher vehicle registrations on the back of the festive season, and rising labour force participation rate in urban areas. and continued momentum in Increase in Property registrations during the quarter.
  • Going forward, economic activity will depend on the trajectory of further cases of COVID-19, the progress of the vaccination programme, the intensity of restrictions on movement and the period for which they continue.

Core Operating Profit:

  • The Growth in the core operating profit in a risk-calibrated manner is achieved through the focused pursuit of target market segments.
  • The core operating profit increased by 23.3% YoY and 10.6% Sequentially to Rs.9,518 Cr in Q2 FY21.
  • For HY2022, the core operating profit grew from 14,733 to 18,123 Cr.
  • Bank is aiming to achieve risk-calibrated growth in core operating profit through a 360-degree customer centric approach, tapping opportunities across ecosystems, leveraging internal synergies, building partnerships and decongesting processes.
  • Cross-functional teams have been created to tap into key customer and market segments, enabling 360 degree coverage of customers and increase in wallet share.

Balance sheet Highlights:

  • Bank’s Balance sheet remains resilient. The liquidity coverage ratio (LCR) for the quarter was 133%, reflecting continued significant surplus liquidity.
  • The capital position of the Bank continued to be strong with Total Capital Adequacy Ratio was at 19.52%, well above the RBI’s Regulatory Minimum Level of 11.075%. Also, CET1Ratio at 17.33% which is 9.76% points more than the regulatory minimum of 7.57%. 
  • The bank is protecting balance sheet from Potential Risks by maintaining robust provision coverage ratio at 80.1% as at the end of Sept-21.  Bank continued to held provision of 6,425 crores (0.8% of total advances) as on 30 sept 2021. The same level of provision was held on 30 June, 2021.

Enhancing Strong Deposit Franchise:

  • Deposit growth continued to be robust, with total deposits growing at 17.3% YoY at Sept 30, 2021. Average CASA deposits reported a growth of 23.6% YoY, while CASA Ratio stands at 44.1% in Q2 FY22. While, Term deposits grew by 12.5% YoY to Rs.5.2 Lakh Cr.
  • Bank’s cost of deposits continues to lower Q-o-Q. It came down from 3.65% in Q1 to 3.53% in Q2 FY22.Bank’s cost of deposits continues to be among the lowest in the industry (3.53% in Q2 FY22)
  • Bank have focused on tapping into various ecosystems like payments, merchants and corporate ecosystems including the employees, start-ups, dealers and vendors. Its digital offerings and platforms and efforts towards process decongestion have played an important role in the growth of our deposit franchise.

Growing Loan Portfolio in a granular manner:

  • Bank is growing its loan portfolio in a granular manner with a focus on risk and reward. Mortgage disbursements continued to increase in Q2FY22 over the Q2 FY21 driven by efforts to offer a convenient and frictionless experience to customers by digitising the entire underwriting process, with instant loan approvals. It recorded a growth of 25% Y-o-Y to 2,646 crores as at the end of 30 Sept, 2021.
  • Disbursements of Commercial Vehicles and Equipment loans (CV/CE) also increased further in Q2 over Q1 FY 22. The growth in business banking continued to be robust as we continued to leverage our distribution network and our digital platforms such as InstaBIZ and Trade Online.
  • Disbursements of personal loans and auto loans were also close to Q4 of 2021 levels.
  • Overall, the domestic loan portfolio grew by 19% YoY and 4% sequentially.

Retail Loans:

  • The retail loan portfolio grew by 20% YoY and 5% Sequentially, with Retail Loan share now at a high of 68%, mainly driven by strong traction in mortgages, auto and business loans.
    • Growth in the retail portfolio on the back of increasing penetration in existing customer base, digital infra (seamless and pre-approved underwriting) and market share gains.
    • Credit card business still strong for the bank as a whole.

Corporate Loans:

  • Corporate Loan Portfolio contributes 22.8%, while SME Portfolio is 4.3%.
    • The growth of the performing domestic corporate portfolio was 11.5% YoY.
    • The amount disbursed under ECLGS 1.0 scheme is Rs.13,800 Cr, Rs.1,900 Cr under ECLGS 2.0 scheme and Rs.2,000 Cr under ECLGS 3.0 scheme.  
    • In addition to the manufacturing sector, the services sector and financial sponsor sectors have been identified as new segments for lending.
    • Bank’s international corporate book continued to shrink, now forming ~5% of portfolio.

Credit Cards:

  • Credit card spends increased significantly, 6% Q-o-Q driven by spends across electronics, wellness and jewellery categories.
  • Value of Credit cards spends grew 47% sequentially. Spends across most categories other than travel crossed March 21 levels in September.
  • As per RBI data, total market share of ICICI Bank was 19.6% in August 2021.
  • Credit cards in force increased by 6.0% sequentially and the value of credit card spends grew by 47.0% sequentially
  • The bank has successfully converted the opportunities of RBI’s ban on HDFC Bank’s new credit card issuances and thus consistently gaining the market share with strong momentum continued in new issuances. Monthly spends and spends per card are also well-above the industry average.

Asset Quality:

  • Gross NPA additions in Q2 FY22 were Rs.5,578 Cr as compared to 7,231 crores in Q1 FY22. The gross NPA additions from the retail and banking business portfolio, were Rs.4,624 Cr. While the gross NPA additions from the corporate and SME portfolio, were Rs.9.54 billion Rupees, entire additions was from the portfolio rated BB and below as of June 21.
  • Recoveries and upgrades, excluding write-offs and sale, were Rs.5,482 Cr in the Sept-21 quarter. There were recoveries and upgrades of Rs.5,178 Cr from the retail and banking business portfolio and Rs.3,040 Cr from the corporate and SME portfolio.
  • The gross NPAs written-off during the Sept-21 quarter were Rs.1,717 Cr.
  • GNPA ratio was at 4.82% of gross advances in Q2 FY22 compared to 5.36% in Q2 FY21 Proforma NPA and 5.15% in Q1 FY22.
  • Net NPA ratio at 0.99% of net advances in Q2 FY22, In Q1 FY22, it was also at 1.16% on a pro forma basis and at 1.12% in Q2 FY20.
  • Provision coverage ratio was at 80.1% in Sept-21 as against Pro-forma PCR of 79.9% in the Sept-20 quarter and 78.2% in June-21.
  • In addition, the Bank continues to hold Covid-19 provisions of 64.25 billion Rupees or about 0.8% of total loans as of September 30, 2021.

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