Worsening asset quality dragged down the profitability of the largest private sector lender, ICICI Bank. The bank on Friday reported 14% rise in net profit to Rs 2,889 crore, but fell below market expectations due to higher provisions for bad loans.
Worsening asset quality dragged down the profitability of the largest private sector lender, ICICI Bank. The bank on Friday reported 14% rise in net profit to Rs 2,889 crore, but fell below market expectations due to higher provisions for bad loans.
The bank set aside Rs 979.89 crore for provisions during the quarter. The profit was driven by treasury income and dividend income from subsidiaries. The dividend income from subsidiaries was Rs 348 crore and treasury contributed Rs 443 crore to the profitability of the bank.
On National Stock Exchange, the ICICI Bank share tumbled 5.25% to Rs 360.25 reacting to the results.
The asset quality of the bank deteriorated further with fresh bad loan addition of Rs 3,200 crore in the third quarter including a Rs 776 crore of slippages from the restructured book. The bank made recoveries of Rs 500 crore and Rs 180 crore of write-offs during the quarter. About Rs 50 core of bad loans were sold off to the asset reconstruction companies (ARCs). The bank expects the asset quality to deteriorate further with a restructuring pipeline of Rs 2,300 crore in the third quarter.
The incremental advances during the quarter was Rs 6,000, most of which came from the retail lending. The bank continued to have a calibrated approach to the corporate book focusing only on refinance Chanda Kochhar, managing director and chief executive officer, ICICI Bank, said, "There is a lumpiness in the bad loan category and sometimes one account can make the difference. With the prolonged economic slowdown and uneven recovery, we are seeing increased slippages from the restructured portfolio. The advances growth is at 16% higher than the 11% non-food credit growth in the system."
The net interest margin (NIM) or the difference between the interest earnings on advances and interest expended on deposits rose to 3.46% from 3.32% a year ago and was 4 basis points higher than the preceding quarter. Net interest income increased 13% to Rs 4,812 crore and the non-interest income increased by 10% to Rs 3,091 crore at the end of the third quarter ended December 30 2014.
Saday Sinha, banking analyst, Kotak Securities, said, "Core performance marginally lower and asset impairment came higher. NII came marginally lower than our expectation on back of lower than expected loan growth of 12.8% despite an improvement in NIMs by 4 basis points. The asset quality deteriorated during the quarter with fresh impairment touching Rs 3,200 crore. Other income grew 10.4% but largely due to dividend and Rs.195 crore exchange rate gains on repatriation of retained earnings from overseas branches. However, fee-income remained subdued at 5.7% year-on-year."
Total advances increased by 13% year-on-year to Rs 3,75,345 crore at December 31, 2014 from Rs 3,32,632 crore at December 31, 2013. The year-on-year growth in domestic advances was 16%. The bank has continued to see robust growth in its retail disbursements resulting in a year-on-year growth of 26% in the retail portfolio at December 31, 2014. The retail portfolio constituted about 41%of the loan portfolio of the Bank at December 31, 2014.
During Q3-2015, savings account deposits increased by Rs 4,927 crore. The bank's CASA (current-account, savings-account) ratio improved to 44.0%. Total deposits increased by 12% year-on-year to Rs 355,340 crore at the end of December 31, 2014. Total CASA deposits increased by 14% year-on-year to Rs 1,56,449 crore at the end of the third quarter.
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