Money & Banking

ICICI Bank’s profit growth weighed down by bad loan provisioning

Beena Parmar Mumbai | Updated on January 23, 2018

Chanda Kochhar, MD and CEO, ICICI Bank

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Turnaround of the economy has been more volatile and gradual than expected, says MD



Higher provisioning towards bad loans weighed on ICICI Bank’s profitability in the January-March 2015 quarter.

The country’s largest private sector lender posted a 10 per cent increase in standalone net profit in the reporting period at ₹2,922 crore amid some pressure on asset quality.

Rival HDFC Bank had posted a relatively healthier profit growth of 21 per cent at ₹2,807 crore for the fourth quarter.

Provisions surge

During the quarter, net interest income (the difference between interest earned and expended) increased 17 per cent to ₹5,079 crore.

Non-interest income also climbed 17 per cent to ₹3,496 crore driven by treasury income and gains through dividends received from subsidiaries.

According to Saday Sinha, Banking Analyst at Kotak Securities, “ICICI Bank’s core performance came marginally ahead on the back of better-than-expected net interest margin (3.57 per cent in Q4 FY15) while loan book grew at a healthy pace (14.4 per cent).

“PAT came marginally lower due to a sharp rise in provisions. Asset quality continued to remain a drag as slippage from the restructured portfolio spiked. And, fresh impairment remained elevated at 2.7 per cent in line with the management’s guidance.”

Provisions surged 88 per cent to ₹1,344 crore in Q4 from ₹714 crore in the year-ago quarter.

“FY15 was the peak as far as NPAs, restructured assets and credit costs are concerned. We expect to do better in FY16,” said Chanda Kochhar, MD and CEO, ICICI Bank.

“The turnaround of the economy has been more volatile and gradual than expected. Hence, 25 per cent of restructured assets were because they were not able to meet the ‘norms’,” she added.

Gross non-performing assets (NPAs) worsened to 3.78 per cent as on March-end 2015 compared with 3.03 per cent on March-end 2014.

Loan growth of 14 per cent was helped by a 25 per cent growth in retail advances and 10 per cent growth in corporate loans.

“Home and auto loans grew… and we saw good demand for working capital loans from rated companies and funding to public sector companies,” Kochhar said in a post-results conference call. About 25 per cent of the restructured assets are because they failed to meet the norms…The restructuring pipeline is at ₹1,500 crore, going forward,” she added.

The bank expects credit growth to be about 18-20 per cent and deposit growth 15-16 per cent for FY16, Kochhar said.

Full year show

For the full FY15, net profit rose 14 per cent to ₹11,175 crore from ₹9,810 crore in the previous year.

Provisions jumped 49 per cent to ₹3,900 crore during the year from ₹2,626 crore last year.

Consolidated performance

On a consolidated basis, the net profit increased 13 per cent to ₹3,085 crore for the quarter and 11 per cent to ₹12,247 crore for the full year.

Subsidiary company ICICI Prudential Life Insurance’s profit after tax grew by a meagre 4 per cent to ₹1,634 crore in FY15 (₹1,567 crore in FY14).

ICICI Lombard General Insurance’s profit was almost flat at ₹536 crore ( ₹511 crore).

The bank’s board proposed a dividend of ₹5 a share of face value ₹2 each for FY15.

The shares of ICICI Bank ended weaker at ₹302.40 apiece on Monday, down ₹5.70 (1.85 per cent) over the previous close on the BSE.

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Published on April 27, 2015
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