ICICI Bank Limited Q2 FY24 Earnings Conference Call Insights

Key highlights from ICICI Bank Limited (ICICIBANK) Q2 FY24 Earnings Concall

• Loan Growth And Credit Quality
  • Domestic loan portfolio grew 19.3% year-on-year and 4.8% sequentially at September 30, 2023.
  • The retail loan portfolio grew 21.4% year-on-year and 5.5% sequentially. Retail loans were 46% of total loans.
  • The net NPA ratio declined to 0.43% at September 30, 2023 from 0.48% last quarter and 0.6% a year ago.
  • There were net additions of INR 1.16 billion to gross NPAs this quarter compared to INR 18.07 billion last quarter.
  • The Bank continues to hold contingency provisions of INR 131 billion or 1.2% of total loans.
• Net Interest Income
  • NII increased by 23.8% year-on-year to INR 183.08 billion in Q2 FY2024.
  • The net interest margin was 4.53% this quarter compared to 4.31% in Q2 last year.
  • The sequential decline in NIM reflects the lagged impact of higher term deposit rates.
  • The domestic NIM was 4.61% this quarter compared to 4.45% in Q2 last year.
• Fee Income And Profitability
  • Fee income increased by 16.2% year-on-year to INR 52.04 billion in Q2 FY2024.
  • Fees from retail, rural, business banking and SME customers were 78% of total fees.
  • Growth in fees reflects increased digital adoption and transactions by customers.
  • PBT excluding treasury grew by 35.7% year-on-year to INR 137.31 billion.
  • The core operating profit increased by 21.7% year-on-year to INR 143.14 billion.
  • PAT grew by 35.8% year-on-year to INR 102.61 billion in Q2 FY2024.
• Operating Expenses
  • Operating expenses increased by 20.8% year-on-year in Q2 FY2024.
  • Employee expenses increased by 29% year-on-year due to increase in headcount to 139,000.
  • Number of employees increased by 29,000 in last 12 months.
  • Non-employee expenses increased 16.3% year-on-year due to technology and retail business expenses.
  • Branch count increased by 174 in Q2 FY2024 to 6,248 branches.
• Provisions And Digital Offerings
  • Total provisions declined sequentially to INR 5.83 billion in Q2 FY2024.
  • Provisioning coverage ratio was 82.6% and contingency provisions were INR 131 billion.
  • 71% of trade transactions were done digitally in Q2 FY2024, up 29.7% year-on-year.
  • Digital platforms seeing increased adoption for transactions and payments.
• Unsecured Loans Portfolio
  • Trends in ICICI Bank’s unsecured loans portfolio are stable based on monitoring of delinquencies and credit costs.
  • Focus has been on existing customers with credit scores above a threshold and assessing leverage.
  • Industry outlook shows distinction between smaller and larger ticket size segments.
• Recovery and Upgrades
  • Retail slippages have been around 3% of portfolio, with recovery/upgrades at 60% of that amount.
  • Expect the trends in recovery and upgrades to remain reasonably stable going forward.
  • Could see some quarterly variations.
• Branch Expansion Strategy
  • Added about 350 branches in H1 FY2024.
  • Expansion is based on growth opportunities in micro-markets and not driven by expansion strategies of other banks.
• Mortgage and Auto Loan Growth
  • Mortgage portfolio has been growing at 16-17% year-on-year.
  • Auto loans have been growing at above 20% year-on-year.
  • Commercial vehicle loans growing at 12-14% now.
• Margin Outlook
  • Expect some further moderation in margins from Q2 levels.
  • But full year margin likely to be similar to FY2023 levels.
  • Deposit repricing impact will continue over next few quarters.
• Yield on Loans
  • 5 basis points decline in yields due to computation conventions.
  • Some pricing competition in the market but not a major movement in yields.