ICICI Bank’s Profit Halves As Provisions Surge In March Quarter

ICICI Bank Ltd.’s profitability took a hit in the quarter ended March as bad loans and provisions soared after the Reserve Bank of India overhauled its stressed asset resolution mechanism.

Net profit fell nearly 50 percent over the same quarter last year to Rs 1,020 crore, according to ICICI Bank’s filing with the stock exchanges. That’s slightly lower than the Rs 1,061 crore estimated by analysts tracked by Bloomberg.

• Net interest income, or the core income, rose a percent to Rs 6,022 crore
• Gross non-performing assets as a percentage of total assets increased sequentially to 9.9 percent from 8.6 percent.
• Net NPA ratio rose to 5.4 percent from 4.6 percent in the previous quarter
• Provisions jumped 86 percent sequentially to Rs 6,625.7 crore

India’s second largest private lender continued to see its asset quality deteriorate after RBI’s in a Feb. 12 circular revised its stressed asset framework to ensure speedy resolution of bad loans in the future. The new mechanism subsumed all existing stressed asset scheme to improve early recognition of bad loans. Over 60 percent of the Rs 15,737 crore gross addition to ICICI Banks bad loans were under schemes that the new framework replaced.

The Chanda Kochhar-led bank aims to bring down its gross bad loans to 1.5 percent of the total assets within the next couple of years by focusing more on retail lending. Retail loans will account for over 60 percent of the total loan book by March 2020, Managing Director and Chief Executive Kochhar told reporters in a briefing after the earnings announcement. The bank has “substantially” cut down risk on its corporate loan book by lending to higher rated companies during the year.

ICICI Bank has an exposure of more than Rs 15,000 crore to the accounts facing insolvency action at the National Company Law Tribunal and has provisioned for 50 percent of this amount, Kocchar said.

The lender has classified three borrower accounts in the gems and jewellery sector with total exposure of Rs 794.87 crore as fraud and non-performing. It has made provisions of Rs 289.45 crore from the P&L and Rs 505.42 crore from reserves and surplus against these accounts.

ICICI Bank's profit in the fourth quarter was improved particularly by gains from selling stake in its insurance and broking subsiadiaries. Other income rose 88.2 percent over the same quarter last year to Rs 5,678 crore.

ICICI Bank's share price has fallen 8.1 percent so far this year, compared to a 3.3 percent rise in India's benchmark S&P BSE Sensex Index. The stock erosion was partly due to allegations of nepotism against chief executive officer Chanda Kochhar over loans sanctioned to debt-laden Videocon Industries Ltd.

The board did not discuss the Videocon issue at its meeting today. Kocchar said that she did not have to add anything more in the matter.