ICICI Bank Q2 profit down by 34%: Rise in bad loans eat into biggest private lender's earnings

Mail Today Bureau   New Delhi     Last Updated: October 28, 2017  | 10:14 IST
ICICI Bank Q2 profit down by 34%: Rise in bad loans eat into biggest private lender's earnings

ICICI Bank Ltd, the country's biggest lender, reported a 34 per cent decline in profit during the July-September quarter as income fell and a higher provision had to be made for bad loans and bankruptcy cases. ICICI Bank, which is among the three domestic banks considered "too big to fail" by the RBI , said net profit was Rs 2,058 crore in the second quarter down from Rs 3,102 crore in the same quarter last year.

Net interest income and fee income rose by 9 per cent each in the quarter. Non-interest income in the quarter included gains of Rs 2,012 crore from the stake sale in ICICI Lombard General Insurance which listed this year. ICICI Bank managing director and chief executive Chanda Kochhar said this was much lower than one-time gain of Rs 5,682 crore which the bank made from the stake sale in ICICI Prudential Life Insurance in the year ago quarter and is the main reason for the fall in profit.

ICICI, which has the highest bad loans in absolute terms among private-sector banks in the country, said its total provisions, including for loan losses, were Rs 4,503 crore in the September quarter, higher than Rs 2,609 crore three months ago, but 36 per cent lower than a year ago.

The banks gross non-performing assets moved up to 7.87 per cent on the back of a Rs 4,634 crore in fresh slippages during the quarter, which Kochhar said is slower than the Rs 4,936 crore accretion in the preceding quarter and Rs 8,029 crore in the same period last year. She said the trend of NPA accretion is slowing down and the bank's 'drilled down' list of assets which can slip has also narrowed down to Rs 19,590 crore now from the Rs 20,358 crore in the year-ago period.

Kochhar said the bank expects the NPAs in 2017-18 to be significantly lower than those in 2016-17, even as it awaits results of the RBI's risk based supervision (RBS) exercise, the results of which are expected in the third quarter. The RBS results have already hit the asset quality of Axis bank and Yes Bank because of the 'divergences' or under-reporting discovered by the regulator, which has mandated banks to recognise more assets as bad, ensuing in extra provisions being made that has eroded profits.

ICICI Bank's total provisions went up to Rs 4,502 crore as compared Rs 2,483 crore in the same quarter last year. Kochhar said they included Rs 651 crore in provisions towards dud assets mandated to be resolved under the insolvency laws. She said in addition to the exposure to 9 of the 12 accounts in the first list of IBC accounts given by RBI, it has exposure to 18 more accounts in the newer list speculated to consist 30 accounts.

The total fund-based exposure to these 18 accounts which need to be resolved by December 31 is Rs 10,476 crore and the non-fund based exposure is Rs 1,384 crore. Kochhar expressed satisfaction with the progress on the initial list of 12 accounts, saying 11 of them are already in the NCLTs. The write-offs came at Rs 2,298 crore, while the recoveries and upgrades stood at Rs 1,029 crore.

The bank is targeting for a 15 per cent growth in domestic advances in 2017-18 on the back of a 18-20 per cent growth in retail, Kochhar said. Bad loans in the country's banking sector have hit a record Rs 9.5 lakh crore as of end-June. This has reduced the capacity of the banking sector to extend further loans for investments which in turn has slowed down growth which would have created more jobs in the country for the growing workforce.

The 21 public sector banks account for the bulk of the soured loans. The government has this week announced a Rs 2.11 lakh crore fresh infusion tom recapitalize these banks so that they extend credit to businesses to spur economic growth.

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