Top private banks see robust Q2 profit surge amid ongoing loan growth

Two of India's top private banks, ICICI Bank and Kotak Mahindra Bank, have reported strong profit growth in the July-September quarter on the back of a robust economic environment supporting increased consumer loans.

ICICI Bank, the country's second-largest private lender, notably exceeded analysts' expectations by posting a 35.8 per cent year-on-year rise in standalone net profit ICICI Bank, the country's second-largest private lender, notably exceeded analysts' expectations by posting a 35.8 per cent year-on-year rise in standalone net profit at Rs 10,261 crore ($1.23 billion) in the second quarter. The bank's net interest income, the difference between interest earned and paid, surged by nearly 24 per cent to 18,308 crore, with improved asset quality.

This surge in profitability is attributed to a 19 per cent year-on-year growth in ICICI Bank's loan portfolio, which helped offset a decline in the net interest margin (NIM) from the previous quarter. The bank's executive director expressed confidence that the NIM decrease would stabilise in the upcoming quarters.

Kotak Mahindra Bank, India's fourth-largest bank by market capitalisation, reported a 21 per cent increase in loans during the second quarter, contributing to a 24 per cent boost in standalone net profit. The sustained double-digit loan growth in Indian banks over recent months has been driven by the escalating demand for credit amid increased consumer spending. The upcoming festive season is anticipated to further fuel customer spending and sustain the demand for retail loans.

While the banking regulator has raised concerns about the substantial rise in unsecured loans, primarily personal loans and credit cards, these loans remain a significant source of profit margins due to their higher interest rates. Although delinquencies in the unsecured lending portfolio are increasing, the situation is not a cause for immediate concern, according to Dipak Gupta, the Managing Director and CEO of Kotak Mahindra Bank.

A similar positive trend was observed at Yes Bank, a mid-sized private lender, which reported a 47 per cent increase in net profit for the second quarter, also benefiting from heightened loan demand. While concerns about the unsecured loan portfolio persist, they are currently deemed as non-significant, as stated by the bank's Managing Director, Prashant Kumar.

(With Reuters Inputs)