July 25, 2009 / 11:54 AM / 10 years ago

UPDATE 1-India's ICICI Bank Q1 net up 21 pct

* Net profit rises 21 percent boosted by trading income

* Sees loan growth resuming in second half of the year

* Analysts see FY10 loan growth at 5 pct

(Recasts, adds official and analyst quotes)

By Narayanan Somasundaram & Bharghavi Nagaraju

MUMBAI, July 25 (Reuters) - ICICI Bank Ltd (ICBK.BO), India’s No.2 lender, on Saturday beat forecast with a 20.6 percent rise in net profit helped by higher trading income.

ICICI said net profit rose to 8.78 billion rupees ($182 million) in its fiscal first quarter ending in June, from 7.28 billion rupees reported a year ago.

A Reuters poll of analysts had forecast net profit to rise to 7.7 billion rupees.

A senior company official said loan growth was likely to resume in the second half of the year.

New York-listed ICICI (IBN.N) saw its total loan book fall by 11.6 percent in the quarter to $41.4 billion as it curbed lending to rein in bad debts.

“We should see a net loan growth from the second half when the rise in corporate, housing and auto loans overtake the reduction in unsecured advances,” Chanda Kochhar, who took over in May as Managing Director said in a conference call.

ICICI, which grew loans by a third in the past few years by boosting retail, personal loans and credits, has changed tack to concentrate on the safer corporate and housing loans.

Analysts expect the bank to see a full fledged revival in loan growth in the year to March 2011 only.

“I see their FY10 loan growth at about 5 percent,” said Angel Broking analyst Vaibhav Agrawal. “I see muted core operating performance for the full year. Their strategy to cut costs and curb lending is helping them reach a stronger wicket when the environment improves next fiscal year.”

India bank loan INLOAN=ECI growth has slid to 16 percent in June from nearly double that in the year to March 2008 as demand for credit fell in a slowing economy.

TRADING INCOME

Profits were primarily boosted by treasury income, trading in bonds and currencies that recorded a pre-tax profit of 10.97 billion rupees from a loss of 4.09 billion rupees a year ago.

Most Indian banks have gained from trading income but rising bond yields on concerns of record government borrowing of $93 billion could dent gains in the coming quarters. Bond prices move inversely to price.

The bank said operating expenses slid by a fifth to 14.94 billion rupees in the quarter as it cut employee costs and loan marketing expenses.

But bad debts as a percentage of gross advances rose to 4.63 percent from 3.72 percent a year ago and analysts said defaults appear to be plateauing. Bad debts slipped marginally from the previous quarter though it increased on year.

Retail loans, which account for nearly half the loan book, posted a loss in the quarter but Kochhar said falling costs should reverse the course.

Larger rival State Bank of India (SBI.BO) is expected to say on July 30 its quarterly net rose 22.5 pct. [ID:nBOM542365]>

Net interest income, the difference between interest earned and paid, fell 5 percent to 19.85 billion rupees, ICICI said.

It plans to add 580 more branches to its 1,471-strong network to tap low cost deposits that reached 30.4 percent of total from 27.6 in the year ago.

Shares in ICICI, which has a market value of about $17.6 billion, rose 117 percent in the June quarter, compared to an 83 percent rise in the sector index .BSEBANK and 49.3 percent rise in the benchmark index .BSESN.

The stock closed 1.4 percent lower at 766.85 rupees on Friday in a Mumbai market that climbed almost 1 percent.

$1=48.2 rupees Editing by James Jukwey

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