ICICI Bank, India's biggest private- sector bank, said fiscal first-quarter profit rose 23 percent as a growing economy and the lowest interest rates in more than three decades encouraged companies and consumers to borrow more.
Net income rose to 5.3 billion rupees ($122 million), or 7.11 rupees a share, in the three months ended June 30, from 4.31 billion rupees, or 6.05 rupees a share, a year ago, the Mumbai- based lender said in a statement. That was higher than the 5.08 billion rupee median estimate of five analysts Bloomberg News surveyed.
Individuals are taking advantage of the lowest interest rates in three decades to buy motorcycles, personal computers and cars, and companies are investing to expand facilities to increase production. A normal monsoon rain may lift economic growth, forecast by the government to reach 7 percent in the year to next March, and boost demand for credit in the countryside, home to 700 million Indians.
``I am very positive on the banking sector as there's a tremendous amount of credit growth,'' Paras Adenwala, chief investment officer at ING Investment Management, said yesterday. ``The monsoon rains seem to be good and that will also help agricultural credit to grow.''
Bank loans in India rose 31 percent to 11.42 trillion rupees in the year ended March, according to central bank data, the biggest rise since 1971 when it started compiling the figure.
The bank expects the retail segment to grow 35 percent to 40 percent, said Kalpana Morparia, deputy managing director, without giving details. The bank's net interest margin in the first quarter was 2.4 percent compared with 2.3 percent in the year ago, she said.
ICICI Bank's revenue rose to 40.9 billion rupees at the end of June from 28.5 billion rupees a year earlier. The lender said net interest income rose to 8.5 billion rupees from 6.3 billion. Loans rose to 979.1 billion rupees from 658.3 billion and deposits grew 70 percent to 1.14 trillion rupees from 667.8 billion, the bank said in a statement.
The lender said provisions and contingencies rose to 2.98 billion rupees from 460 million rupees.
The lender's shares, which rose 2.5 percent to 536 rupees yesterday, have advanced 48 percent over the past six months, outpacing a 16.5 percent gain in the benchmark Mumbai stock exchange Sensitive Index over the same period.
Chief Executive Officer K.V. Kamath is focusing on consumer credit to boost earnings at ICICI Bank.
Consumer loans made up 63 percent of total loans made by ICICI Bank as of June 30, up from 61 percent as on March 31.
ICICI Bank has a 31 percent share of the market for home mortgages, funds four of every 10 automobile purchases in India and a third of the loans made to buy personal computers, the bank said in April.
``Demand from consumers too is robust because of the low rates,'' U.P. Bhat, who manages 20 billion rupees of equity and debt at Canara Bank Mutual Fund in Mumbai, said before the earnings announcement.
Homebuyers in the world's second-most populous country are taking advantage of tax breaks on interest payments on mortgages to borrow from banks. The government allows homebuyers to deduct as much as 150,000 rupees a year in mortgage interest payments from their taxable income, an incentive to reduce a housing shortfall of 20 million units.
Consumer borrowing from banks rose an average 40 percent over the past three years, driven mainly by housing loans.
In its quarterly monetary policy on July 26, the central bank maintained its 7 percent economic growth target for the year to March 31, 2006. The economy expanded 6.9 percent in the year ended March 31, the government estimates, after 8.5 percent growth in the previous year, the most since 1989.
The Index for Industrial Production rose 9.5 percent in the first two months of the fiscal year that began April 1, aided by 10.5 percent growth in manufacturing output, the central bank said.