ICICI Bank Q4 net profit halves to Rs 10.2 bn, bad loan provisions surge

ICICI Bank Q4 net profit halves to Rs 10.2 bn, bad loan provisions surge

Mumbai, May 8: ICICI Bank on Monday posted a net profit of Rs 10.2 billion for the quarter ended March 2018, against Rs 20.2 billion a year ago, due to a sharp rise in provision for bad loans. The bank’s profit was boosted by a one-time income arising from the sale of shares in its capital market arm, ICICI Securities, to the tune of Rs 33.20 billion.
Additionally, three loan accounts in the gems and jewellery sector with fund-based outstanding of Rs 7.95 billion were classified as fraud and non-performing, and during the fourth quarter, the bank made a provision of Rs 2.89 billion through its profit and loss account, and Rs 5.05 billion by debiting reserves and surplus as permitted by the Reserve Bank of India (RBI), ICICI Bank said in a statement. Adjusted for these, the bank would have ended up in a loss at the net level.
Despite the lacklustre show, the bank’s American Depository Receipts (ADRs) listed in the US were up over 5 per cent at the time of going to press. The positive reaction is due to slippages, incremental loans turning bad, being lower than analyst estimates. Additionally, the drill-down list, the amount of loans that could potentially turn bad, fell sharply to Rs 47.28 billion.
The March-quarter profit is the lowest for the bank in the last eight quarters, and a tad lower than Rs 10.6 billion estimated by analysts polled by Bloomberg.
This is the first quarter after allegations of conflict of interest were reported between ICICI Bank Managing Director and Chief Executive Officer Chanda Kochhar and the Videocon group, in a loan given to the latter. Kochhar and the bank have denied all allegations.
The bank’s asset quality deteriorated sharply as gross non-performing assets (NPAs), as a percentage of gross advances, stood at 9.9 per cent during the January-March quarter, against 8.55 per cent in the previous quarter.
In the year-ago period, the gross NPA ratio was at 8.74 per cent.
Slippages grew four-fold to Rs 157.37 billion, the highest ever for the bank, during the quarter, compared to Rs 43.8 billion in the previous quarter.
“The fourth quarter saw elevated levels of gross NPA additions, out of which Rs 99.68 billion of loans were those relating to RBI schemes and classified as standard as on December 2017, which had been discontinued,” Kochhar said. Following a new rule in February, all schemes, including SDR and S4A, stand withdrawn. Excluding these, fresh slippages stood at Rs 57.7 billion, higher than Rs 43.8 billion in the previous quarter, according to analysts. The bank does not see any further slippages due to changes in rules going ahead, as the entire chunk from restructured assets was recognised during the quarter.
The bank targets its net NPA ratio to come down to 1.5 per cent by March 2020, from 4.8 per cent at the end of March 2018. It will also improve provision coverage ratio to over 70 per cent by 2019-20, from just above 60 per cent as of March 2018, to fortify the balance sheet.
Provisions and contingencies rose to Rs 66.25 billion during the March quarter, against Rs 20.24 billion a year ago. Provisioning levels include cumulative technical and prudential write-offs.
Net interest income, or the interest earned minus interest expended, stood at Rs 60.22 billion during the March quarter, from Rs 59.62 billion in the year-ago period, only a 1 per cent increase.
Net interest margin (NIM), the difference between the yield on advances and the cost of funds, an indicator of profitability, rose to 3.24 per cent, against 3.14 per cent in the previous quarter.