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N.S.Vageesh

Chennai, Oct. 28 Some quarters ago, it seemed that ICICI Bank was on a roll and would soon overtake rival State Bank of India in profit sweepstakes.

In the just announced results for the second quarter, the contrast with that rosy picture could not be starker.

ICICI Bank’s profits have been almost flat while SBI’s profits are up 40 per cent.

The ICICI Bank stock has suffered a vertiginous drop over the last few months.

To add insult, ICICI Bank has had to undergo the ignominy of a few ‘runs’ in different places.

Investor and depositor confidence has been badly shaken.

The bank has required testimonials from the regulator, the Finance Ministry and its brand ambassador to provide some reassurance and restore a semblance of normalcy to its operations.

The marginal decline in its deposit base as of September 30, 2008, is explained by the bank as a conscious strategy to reduce its dependence on wholesale deposits and focus more on low-cost current and savings accounts.

The bank has suffered on a couple of other issues. It has had to curb its retail loan book given the decelerating economy and rising default rates. Provisions for bad loans rose by 43 per cent to about Rs 923 crore in this quarter. Gross non-performing assets were at close to Rs 9,501 crore as compared with about Rs 5,931 crore a year ago.

Net NPAs as a percentage of loans were at 1.91 per cent, compared with 1.43 per cent a year ago.

These NPA percentages don’t look alarming when seen against the size of its loan book or even against the backdrop of Indian banking history as well as ICICI Bank’s own record a decade ago. However, the fact that this number is rising, and could go up further - even in its corporate loan portfolio as the economy deteriorates further, coupled with a serious perception problem, heightens the risks for the bank.

Plummeting stock values have also eroded the capital gains for the bank this quarter. IDBI Bank too suffered a bit on the same account. For those private banks that were active in equity sales, this quarter may throw up negative surprises.

Perhaps, the one major benefit of this slowdown is that there may be fewer calls on your cell-phones from ICICI Bank offering you loans that you don’t want.

The bank has cut its direct marketing agency expenses to about Rs 145 crore compared with Rs 385 crore earlier.

More Stories on : Financial Performance | Private Banks | ICICI Bank Ltd

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