ICICI Bank is expected to report a 16.2% year-on-year rise in standalone net profit for the September quarter, even as a surge in foreign currency non-resident bank (FCNR(B)) deposits and the resulting change in its loan mix weigh on margins. Net interest income is projected to grow 16.9%, while provisions are seen rising 87.7% from a year earlier, putting the focus on the balance between earnings growth, funding inflows and credit costs. The lender is set to report its quarterly results on Saturday.
The projected increase in net interest income and profit points to continued earnings growth, but the sequential trend is less favourable. Analysts expect margins to contract from the June quarter as FCNR(B)-linked lending, excess liquidity and a higher share of corporate loans weigh on yields. Nomura expects adjusted net interest margin to fall by about 10 basis points quarter on quarter, while Motilal Oswal sees a 20-basis-point decline. The estimates differ, but both point to pressure on the bank's ability to convert balance-sheet growth into net interest income.
ICICI Bank Q2 Preview (Standalone, YoY)
Also Read | Layoffs Are Rising In Tech, But These Skills Are Helping People Unlock Better Pay
- Net interest income seen 16.9% higher at Rs 25165.98 crore versus Rs 21529 crore
- Net interest margin seen at 4.28% versus 4.3% (4.36% QoQ)
- Profit seen 16.2% higher at Rs 14366.42 crore versus Rs 12358.89 crore
- Provisions seen 87.7% higher at Rs 1716.22 crore versus Rs 914 crore
- Gross NPA seen at 1.39% versus 1.38% (QoQ)
READ | Banks Q2 Preview: FCNR(B) Inflows Lift Growth But Squeeze Margins
The central issue for ICICI Bank this quarter is how it deploys the deposits attracted through FCNR(B) flows without sacrificing margins. Citi estimates that the bank captured 13–14% of industry-wide FCNR inflows, amounting to US$17.88 billion, equivalent to 9.3% of deposits. The resulting overseas-linked lending and improving retail advances are expected to support loan growth, but the funding and lending mix could dilute margins. Analysts also expect higher standard asset provisioning on an expanded advances base to push up credit costs. The sequential profit comparison faces another hurdle: the June quarter benefited from an income-tax refund, interest on that refund, elevated dividend income and higher corporate recoveries.
Here's What Analysts Expect From ICICI Bank Q2 Results
Nomura
Loans are expected to rise 11% quarter on quarter, easing to 6% after excluding FCNR(B)-linked lending.
Adjusted net interest margin is projected to decline by around 10 basis points sequentially. Reported margin could fall about 18 basis points against the June quarter, which benefited from interest on an income-tax refund.
Adjusted net interest income is expected to increase 4% quarter on quarter.
Credit cost is estimated at around 40 basis points, while core pre-provision operating profit is projected to rise 21% year on year.
Fee income should benefit from processing charges on overseas loans. Reported profit after tax is expected to fall 5% sequentially, although adjusted profit could rise 3%.
Citi
FCNR(B) inflows of US$17.88 billion and leverage against an overseas book of about US$9 billion are expected to support advances growth. Improving retail lending and sustained SME traction should add to momentum.
Advances are projected to rise around 9% quarter on quarter and 26% year on year. Deposit growth is estimated at 10% sequentially and 25% annually, after accounting for bulk deposit repayments.
Margins could contract by 10–15 basis points sequentially as FCNR(B)-linked lending and a higher corporate loan mix weigh on yields. The June quarter's benefit from interest on an income-tax refund adds to the comparison.
Processing fees on overseas loans should support fee income, partly offset by lower dividend income and modest treasury gains. Operating expenses are expected to increase 8% year on year.
Credit cost is estimated at 40 basis points. Profit after tax could decline sequentially as the June quarter benefited from tax-related income, higher dividend income and corporate recoveries.
READ | HDFC Bank Q2 Preview: Profit Seen Up 6%, NIM Recovery Remains Elusive
Motilal Oswal
Net interest margin is expected to fall 20 basis points quarter on quarter, reflecting strong FCNR(B) inflows and a higher proportion of leveraged lending.
Advances are projected to grow 9% sequentially and 26.2% annually. Deposits are expected to increase 10.1% quarter on quarter and 25.2% year on year, supported by FCNR(B) flows.
Provisioning could rise modestly from the previous quarter because of higher standard asset provisions on the leveraged portion of the book.
Operating expense growth is expected to trail balance-sheet expansion, while return on assets is projected to remain healthy.
Investec
Headline loan growth should benefit from FCNR(B)-linked lending, although domestic loans are expected to increase 4.5% quarter on quarter.
Deposits are projected to grow around 11% sequentially, driven by FCNR(B) accretion.
Net interest margin could contract around 19 basis points quarter on quarter as the loan mix changes and excess liquidity weighs on yields.
Credit costs are expected to increase sequentially because of higher standard asset provisions, even as asset quality remains healthy.
Return on assets is projected at around 2.27%.
Bank of America (BofA)
A shallower-than-expected slowdown followed by a quick recovery, stronger loan performance than peers and further market-share gains are potential upside risks.
More severe corporate or retail asset-quality deterioration, faster transmission of RBI rate cuts into lending rates and limited government support for economic growth or stressed sectors could weigh on performance.
Further risks from overseas exposures remain a downside concern.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
