India's largest private lender ICICI BankBSE 1.54 % continued its impressive performance in the quarter to September. For the 12th straight quarter, the bank posted a 20% growth in net profit.
Except for its asset quality, the bank's performance exceeded expectations on all fronts. ICICI Bank's standalone profit increased 20% y-o-y to Rs 2,352 crore. This is impressive given the fact that the bank recognised the entire Rs 279 crore mark-to-market loss on its investment portfolio.
RBI had allowed banks to amortize or distribute the mark-to-market losses in bonds over the remaining part of this fiscal. Had the bank availed of this option, its profit would have been higher by nearly 30%.
The bank's asset quality surprisingly improved this quarter. On a quarteron-quarter basis, its gross NPAs fell 15 basis points to 3.08% compared with the previous quarter. While this is still higher than its private sector peers, it appears reasonable considering a higher exposure to stressed sectors.
The bank's restructured loan book increased 15% over previous quarter to Rs 6,826 crore, which was nearly 2.3% of net loans. Given the management guidance of Rs 2,000 crore restructuring pipeline, its NPAs may increase in the coming quarters.
ICICI Bank has been one of the few banks which has seen an expansion in the net interest margins (NIM) this quarter. Its NIM in the September quarter increased four basis points to 3.31% on a quarter-on-quarter basis.
This has been possible due to an increase in low-cost current account and savings account deposits. CASA improved to 43.3% in the September quarter against 39% in the June 2013 quarter. This is one of the highest among private sector banks. Another impressive aspect has been steady loan growth.
The retail segment, which grew by 20%, has been the key driver of the loan book in line with the management guidance. Overall, its loan book in the September quarter grew by 16%, which is nearly in rate as the industry growth during the same period.
At the current price, the stock is trading at a price-to-book value of 1.7, while its peers such as HDFC Bank and Kotak Mahindra BankBSE 0.70 % are trading at 4.3 and 3.3, respectively. ICICI Bank has been trading at a discount due to a lower return on asset and relatively not so better asset quality.
However, given consistent growth the valuation discount may narrow, going forward.