ICICI Bank keeps costs in check, but margin concerns linger

ICICI Bank managed to support a choky lid connected operating expenses (opex), which dipped 3% sequentially, and grew by conscionable astir 9% year-on-year (or 13% year-on-year if determination was nary one-time disbursal of ₹335 crore successful the past year’s Q4). For perspective, ICICI Bank’s opex maturation for the nine-month ended December stood astatine 23% year-on-year. 

Also Read: ICICI Bank Q4 Results: Net nett rises 17% to ₹10,707 crore, NII up 8% YoY

The betterment successful Q4FY24 stemmed chiefly from strategical workforce management, arsenic the slope added fewer number of employees during the quarter. The cost-cutting measures targeted non-employee expenses arsenic well, which fell 4% sequentially, partially owed to seasonal factors, arsenic festive quarters typically spot higher spending connected advertizing and income promotions. Encouragingly, ICICI Bank is assured that the wide moderation successful opex maturation is present to stay, buoying capitalist sentiment. 

The trim successful costs helped propel a 4% sequential leap successful nett net to ₹10,708 crore. The lender’s deposits surged arsenic overmuch arsenic 6% sequentially and astir 20% year-on-year. This was amended than advances (loans) maturation of 2.7% sequentially and 16.2% year-on-year. 
 

Also Read: ICICI Bank: Brokerages stay bullish connected banal station Q4 earnings

The CASA (current relationship savings account) conception emerged arsenic a key driver of deposit growth, providing the slope with a cost-effective root of funds. Whereas, on the lending side, home loans displayed momentum. ICICI Bank's stronghold, retail loans, roseate by 19.4% year-on-year. Corporate loans roseate astatine a slower gait of 10%. 

A agleam spot came from the nett involvement borderline (NIM), which was better-than-expected astatine 4.4%, down 3 ground points (bps) sequentially and 50 bps year-on-year. NIM is nett involvement income of a slope expressed arsenic a percent of the mean interest-earning assets. One ground point is 0.01%. The diminution successful NIM tin beryllium attributed to 9 bps sequential emergence successful outgo of funds (up 76 bps year-on-year). 

“The results for the 4th addressed the near-term concerns connected NIM progression, which was level quarter-on-quarter," said analysts from Kotak Institutional Equities successful a study connected 28 April. “Operating nett maturation has started to dilatory down led by NIM compression but the advancement is good supra expectations," they added. 

ICICI Bank cautioned that NIM mightiness enactment anemic for a portion owed to imaginable increases successful deposit costs (the slope had raised deposit rates successful February). Moreover, they expect this inclination to persist for a fewer quarters earlier immoderate imaginable complaint cuts could travel into play.

The upshot, however, is that the slope remains bullish connected its aboriginal indebtedness maturation trajectory. It projects a strong uptick successful indebtedness disbursements passim FY25. This optimism is bolstered by the bank's quality to support its plus prime portion expanding the business. 

Also Read: Why ICICI Bank employees are dialling ICICI Securities shareholders

The bank's nett NPA ratio, a important parameter reflecting the quality to negociate atrocious loans, saw a sequential dip of 2 bps successful Q4FY24. This improvement, with the ratio settling astatine a steadfast 0.42%, further strengthens the outlook for the bank. 

Analysts astatine Nuvama Institutional Equities said, “With an early-mover vantage successful leveraging exertion for maturation and hazard management, we presumption ICICI Bank arsenic little susceptible to regulatory lapses than peers, not to notation the moderation successful opex overmuch up of peers." ICICI Bank’s opex has moderated up of peers owed to aboriginal investments successful technology, said the brokerage. 

ICICI’s shares are up astir 14%, suggesting investors are factoring successful the brighter representation adequately. Going ahead, NIM compression remains a monitorable, portion keeping a adjacent oculus connected the bank’s indebtedness growth.