ICICI Bank (IBN) Reports Loss in Q1, Stock Rallies 4.4%

ICICI Bank Ltd. IBN announced first-quarter fiscal 2019 (ended Jun 30) results. It incurred a quarterly net loss of INR1.20 billion ($18 million) against net profit of INR20.49 billion in the year-ago quarter.

Despite the dismal performance, shares of ICICI Bank gained 4.4% on the NYSE on Friday. Perhaps improvement in fee income was the primary reason for the bullish investor sentiment.

Results were adversely impacted by drastic rise in provisions and an increase in operating expenses. However, a slight rise in net interest income, higher fee income and improving loan and deposit balances were the tailwinds.

Growth in Revenue Components Offset by Expense Rise

Net interest income inched up 9.2% year over year to INR61.02 billion ($891 million). Net interest margin was 3.19%.

Also, non-interest income of INR30.85 billion ($451 million) soared 21.9% from the prior-year quarter. Notably, fee income increased 16% from the year-ago quarter to INR27.54 billion ($402 million).

Operating expenses totaled INR41.45 billion ($605 million), increasing 9.3% year over year.

Loans & Deposits Increase

As of Jun 30, 2018, ICICI Bank’s total advances amounted to INR5,162.89 billion ($75.4 billion), up 11% year over year. The rise was mainly driven by robust growth in the retail segment with a 20% year-over-year increase in total retail loan portfolio.

ICICI Bank’s total deposits rose 12% from the prior-year quarter to INR5,468.78 billion ($79.9 billion) as of Jun 30, 2018. Moreover, as of the same date, current and savings account ratio was 50.5%.

Credit Quality: A Mixed Bag

As of Jun 30, 2018, net nonperforming assets ratio was 4.19%, decreasing 58 basis points sequentially. Net loans to companies, facilities of which have been restructured, were INR14.13 billion ($206 million) as of Jun 30, 2018.

However, provisions and contingencies jumped significantly from the prior-year quarter to INR59.71 billion ($872 million).

Capital Ratios Improve

In compliance with the Reserve Bank of India's guidelines on Basel III norms, ICICI Bank's capital adequacy was 18.35% and Tier-1 capital adequacy was 15.84% as of Jun 30, 2018. Both the ratios were well above the minimum requirements.

Our Take

Mounting expenses owing to continued investment in franchise are likely to adversely impact ICICI Bank’s bottom line. Also, deteriorating asset quality continues to be a major near-term concern, which is expected to keep hurting the company's financial performance. However, it remains well positioned to capitalize on growth opportunities driven by increased dependence on domestic loans and a stable fund base.

ICICI Bank Limited Price and Consensus

ICICI Bank Limited Price and Consensus | ICICI Bank Limited Quote

ICICI Bank currently carries a Zacks Rank #4 (Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Foreign Banks

Bank of Hawaii Corporation BOH reported second-quarter 2018 earnings per share of $1.30, in line with the Zacks Consensus Estimate. The reported figure compared favorably with $1.05 earned in the prior-year quarter.

UBS Group AG UBS reported second-quarter 2018 net profit attributable to shareholders of CHF 1.28 billion ($1.30 billion), up around 9% from the prior-year quarter.

Deutsche Bank AG DB reported net income of €401 million ($467 million) in second-quarter 2018, which tanked 13.7% from year-ago quarter. Income before income taxes plunged 13.5% year over year to €711 million ($828.1 million).

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