ICICI Bank expects to reverse provisions against its agricultural portfolio over the next two quarters, subject to Reserve Bank of India approval, while deploying foreign-currency deposits is expected to support margins after the December quarter.
The bank told NDTV Profit it had completed its review of agri-portfolio remediation. Any reversal remains subject to regulatory approval, with the lender expecting the process to unfold over the next two quarters.
ICICI Bank reported a 20.1% year-on-year rise in consolidated net profit to Rs 14,843 crore, beating the Rs 14,366-crore estimate.
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Net interest income increased 18% to Rs 25,339 crore, ahead of the Rs 25,166-crore estimate, while operating profit rose 18.9% to Rs 20,575 crore.
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Net interest margin narrowed to 4.18% from 4.36% in the previous quarter, below the 4.3% estimate. Management attributed much of the pressure to FCNR-B deposits, saying these funds would be deployed over the next two quarters. It expects margins to decline marginally again in Q3 before moving higher thereafter.
On deposits, the bank said the slight decline in its current account and savings account (CASA) ratio should be viewed alongside FCNR-B balances.
The shift in the mix between term deposits and CASA was around 9-10 basis points, while absolute net interest income continued to expand.
Management said it would focus on profit before tax and profit after tax. It expects margin recovery to follow as the temporary deposit inflows are deployed.
Asset quality improved during the quarter. Gross non-performing assets fell to 1.20% from 1.38% in the previous quarter, while net NPAs eased to 0.30% from 0.35%.
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Provisions declined to Rs 851 crore from Rs 1,260 crore sequentially and Rs 914 crore a year earlier.
Management also expects two further RBI repo-rate hikes during the current cycle and plans to focus on micromarket business going forward.
The pace of FCNR-B deployment and regulatory approval for agricultural provision reversals will be key factors to watch over the coming quarters.
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