ICICI Bank Ltd, India's largest private-sector lender by assets, is betting on consumer lending to help drive earnings growth this year after car and home loans helped it post over 20 percent profit gain for the third straight quarter.
ICICI is trying to emulate the success of rival HDFC Bank Ltd with a renewed push into consumer loans as corporate investment bears the brunt of economic slowdown as well as bureaucratic bottlenecks.
The bank's retail book, or loans for cars, homes and credit cards, is likely to grow 22-23 percent in the financial year ending March compared with overall credit growth of 17-18 percent, CEO Chanda Kochhar told reporters after the company released earnings results on Friday.
Net profit rose to 23.5 billion rupees in July-September from a year earlier. That compared with a 21.9 billion rupees estimate of 23 analysts polled by Thomson Reuters.
Shares of ICICI, which the market values at $19 billion, ended 0.13 percent higher compared with the benchmark's 0.2 percent decline.
"We are increasing our penetration in India. We added to our number of geographies from where we do home loans, from where we do auto loans, our branch network is also increasing, and all this will continue," Kochhar said.
Car sales are projected to decline, but a wider branch network and strong dealership connections will help ICICI grow in the segment.
"Major growth for ICICI is coming from mortgages and autos. They are actually gaining back their lost market share, but they have a long way to go," said Manish Ostwal, banking analyst with Mumbai-based brokerage KR Choksey.
Consumer lending in 2007 accounted for more than 65 percent of ICICI's assets. It reduced that by almost half after the 2008/09 financial crisis intensified but has since changed track. Its corporate loan business grew just 11 percent in the quarter ended September 30 compared with overall growth of 16 percent.
"Going forward, it will be important to see how they are able to maintain this (retail) growth and manage asset quality pressures," said Jignesh Shial, banking analyst with Mumbai-based IDBI Capital.
Indian economic growth languished near its slowest in three years at 5.5 percent in the quarter that ended in June but was slightly better than expected, signalling the worst may be over for Asia's third-largest economy.
Earlier this month, HDFC Bank ended its record of posting 30 percent on-year profit growth every quarter for the last decade due to investment losses and a squeezed net interest margin.
ICICI's net interest margin, a gauge of profitability for banks, expanded to 3.31 percent during the quarter from 3.00 percent a year earlier. It raised its guidance for the fiscal year to about 3.3 percent.
Net interest income, or the difference between interest earned and paid, rose about 20 percent to 40.4 billion rupees.
Net non-performing loans, as a percentage of total assets, rose to 0.85 percent from 0.82 percent in the prior quarter. Debt restructuring, or steps to ease payment terms for stressed borrowers, grew 15 percent on quarter.
It has a debt restructuring pipeline of 20 billion rupees so far, Kochhar told reporters, adding asset quality pressures are likely to continue.
Prolonged economic slowdown is impairing borrowers' ability to repay loans. Non-performing loans for Indian banks account for nearly 4 percent of total assets compared with a global average of 2.6 percent, according to Thomson Reuters Starmine.