After spending a lot of 2009 and 2010 rebounding from freak-out lows, American banks like Citigroup (NYSE:C) and Bank of America (NYSE:BAC) are choking and sputtering. Not only are investors wrapped up in the negative headlines about potentially huge mortgage documentation risks, but loan growth is stagnant and the U.S. is still over-banked.
On the flip-side, the picture for banks outside of the U.S. and Western Europe is quite a bit brighter. In India, strong credit growth and surprisingly strong credit quality is providing a healthy environment, and ICICI Bank (NYSE:IBN) is making hay while the sun shines.
The Quarter That Was
ICICI reported earnings for its fiscal second quarter that handily surpassed the analysts' targets. Bottom-line earnings rose 19% in the quarter, fueled by 8% growth in net interest income and a 40% drop in provisions. Growth was helped by margin expansion of 10 basis points, loan growth of 2%, and deposit growth of 13%, while a significant rise in expenses (10%) was a dampener. (For more, see The Bottom Line On Margins.)
ICICI reported earnings for its fiscal second quarter that handily surpassed the analysts' targets. Bottom-line earnings rose 19% in the quarter, fueled by 8% growth in net interest income and a 40% drop in provisions. Growth was helped by margin expansion of 10 basis points, loan growth of 2%, and deposit growth of 13%, while a significant rise in expenses (10%) was a dampener. (For more, see The Bottom Line On Margins.)
Credit quality is getting better. As the 40% reduction in provisions might suggest, ICICI is feeling good about its balance sheet. Impaired loans were a bit more than 8% at the end of the quarter, continuing a multi-quarter sequential strength of improvement. As a percentage of loans, non-performing loans were 1.4% in the quarter on a net basis.
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