ICICI Bank has reported a higher than expected net profit on treasury gains of Rs 195 crore. But rest of the numbers clearly showed the impact of rising rates and a large base. ICICI's fiery pace of growth has clearly mellowed with the onslaught of higher rates and its growing base.

Profit growth has been still maintained at a higher than expected 25%. But net interest income has risen by a less impressive 18% to Rs 1741 crore from Rs 1475 crore year ago. In FY07, the NII had grown consistently by over 40%. Net NPAs also continued to show pressure rising to 1.3% of net assets from 0.98% as on march 31 2007. Gross NPAs also rose a whopping 25% to Rs 6000 crore from Rs 4,800 crore year ago.

After the results Chief Financial Officer for the group, Vishkaha Muley said that the bank was impacted by the slowdown in credit that hurt the industry.

Vishakha Mulye said, “If you compare it with the March quarter there has been more or less flat but this is after discounting for almost Rs 4000 crore of sell down that we did in this quarter. If you look at the industry, there is a slowdown in the industry on credit particularly on the retail side. The retail side has grown around 35-40% is expected to grow around 20-25%.”

Thanks to higher cost of deposits, ICICI's net interest margins has also fallen to 2.3% from 2.4% last year. Muley said that while much of the higher costs could be passed on, there was also the burden of a higher CRR for which banks now earn nothing.

“If we were to adjust it for CRR increase and of course the interest on the CRR for the last year because it was there in the income lat year and then they are comparable and they almost looked flat,” Vishakha said.

Muley clearly expects interest rates to soften from here on. Though she was unwilling to say how soon the bank will cut rates or by how much rates will fall.

Vishakha further said, “The expectation is of course that one would see softening. At the lower end of the curve it has already started seeing that but the bucket of one year where the maximum in deposit inflows are we have not seen softening in April levels.”

ICICI's advances grew by 35%, a far cry from the over 40% that the bank maintained for many quarters. Deposits grew by 26% to Rs 2.3 trillion. Muley said that she expects the banking industry to enjoy a better growth when the busy season starts from the second quarter.