ICICI Bank Q1 net dives 22 pc as bad loans stress lingers

Country's largest private sector lender ICICI Bank today reported a 22 per cent drop in June quarter net profit at Rs 2,516 crore at the consolidated level as the company continued to grapple with non-performing assets.

On a standalone basis, the bank's net profit came down to Rs 2,232 crore against Rs 2,976 crore in the year ago period.

The bank dipped into a specially created Rs 3,600 crore reserve, utilising Rs 865.44 crore. A gain of Rs 617.27 crore through stake sales in insurance arms also helped the bottomline during the quarter.

The gross non-performing assets ratio moved up to 5.87 per cent against 5.82 per cent at the end of the preceding March quarter when it recognised a bulk of the asset quality pain and 3.68 per cent in the year ago period.

The lender's Managing Director and Chief Executive Chanda Kochhar said total slippages during the quarter stood at Rs 8,249 crore, and 76 per cent of them were from a specially classified watchlist, which stood at over Rs 44,000 crore as of March 2016.

On the back of slippages, a net reduction of Rs 365 crore and a rating upgrade of Rs 419 crore, the watchlist of assets now stands at Rs 38,723 crore, Kochhar said, declining to give any guidance on how she expects this to shape up.

She said some of the slippages are temporary and nearly 30 per cent of them will get upgraded this fiscal itself.

"There are continued uncertainties in respect of certain sectors due to weak global economic environment, low commodity prices, gradual nature of domestic economic recovery and high leverage," Kochhar told reporters.

She said the bank is working with borrowers on asset sales, de-leveraging and reducing exposure.

Its overall provisions stood at Rs 2,514 crore as against Rs 955 crore in the year-ago period. The provision coverage ratio also slipped to 57 per cent as of June, from 61 per cent level in March and 69 per cent in the year-ago period.

The bank's interest income was also impacted due to the high incidence of bad loans. The core net interest income was almost flat at Rs 5,159 crore, while the net interest margin contracted to 3.16 per cent as against the 3.37 per cent in the preceding March quarter.

Kochhar said the margins will continue to be under pressure till the asset quality woes do not end. 

She said the bank is shifting focus to concentrate more on retail borrowers which is considered a safer bet. "We are reorienting the balance sheet towards lower risks," she said.

Its lending to this segment is already growing at a faster clip and expanded 22 per cent as against the overall loan growth of 12.4 per cent to occupy 46 per cent of the overall share.

The bank also contracted its international loan book by 1.5 per cent during the quarter, she said.

It is targeting to grow the domestic book by 18 per cent during the fiscal, which will be driven by a 22 per cent growth in the retail segment, Kochhar said, adding that the corporate segment will grow in low double digits.

Based on recommendations of a consultancy firm, it has also created a dedicated credit monitoring group which will look after wholesale and SME exposures on a day-to-day basis, she said.

Beyond this, it has also created a new position called the 'Chief Technology and Digital Officer' who will help the bank excel in the upcoming areas and also integrate the technology applicability across verticals.

The quantum of loans under the strategic debt restructuring, wherein banks take majority control of borrowers, was Rs 2,639 crore.

It sold Rs 2,232 crore of assets to ARCs and took a hit of Rs 132 crore on a lower value realisation because of it, Kochhar said, adding that the hit will be ammortised over four quarters.

The share of the low-cost current and saving account deposits, which help the margins, stood at 45.1 per cent as of June 30. The non-interest income moved up 15 per cent to Rs 3,429 crore.

The cost to income ratio was up 39.3 per cent as against 37.8 per cent in the year ago period.

Its capital adequacy stood at 16.45 per cent, with the core tier-I capital at 13.02 per cent.

Among the subsidiaries, ICICI Life Insurance's profit moved up to Rs 405 crore from the Rs 397 crore, while ICICI Lombard General Insurance's net stood at Rs 131 crore, up from Rs 116 crore.

The bank scrip shed 3.40 per cent to close at Rs 262.85 apiece on the BSE, as against a 0.56 per cent correction in the benchmark.