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ICICI net slumps to over 11-year low; shares close down 1.48%

ICICI Bank posted an 87% drop in its net profit on the back of a one-time provisioning of Rs 3,600 crore for bad loans.

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ICICI chief Chanda Kochhar
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In its worst performance in over a decade, ICICI Bank posted a massive 87% plunge in consolidated net profit to Rs 406.71 crore for the March quarter on the spike in provisioning for bad loans and creation of a contingency reserve.

On Friday, after the company announced its results, the bank's shares closed the week at Rs 236.60, down Rs 3.55 or 1.48% from previous day's close.

While provisioning for NPAs has more than doubled in view of the Reserve Bank's asset quality review (AQR) directive, the country's largest private sector lender has set aside a one-time amount of Rs 3,600 crore as reserves for any potential shocks in the future.

It had posted a post-tax net of Rs 3,084 crore on a consolidated basis in the January-March quarter of last fiscal, and Rs 3,122 crore in the preceding quarter, when it started recognising the effects of bad loans following AQR.

On a standalone basis, the bank's net profit tanked 76% to Rs 701.89 crore from Rs 2,922 crore a year ago.

Profit for the reporting quarter eroded on setting aside of Rs 3,600 crore towards "collective contingency and related reserves", above the RBI-mandated provisions in view of the stress it expects from the iron & steel, mining, rigs, power and cement sectors in the future, the bank said.

As of the December quarter, ICICI Bank, which is one of the two systemically important lenders (the other being SBI), did not have a counter-cyclical buffer unlike its private sector peers.

"The weak global economic environment, the downturn in the commodity cycle and the gradual nature of the domestic economic recovery has adversely impacted borrowers. It may take some more time for the resolutions to be worked out," Chanda Kochhar, managing director and chief executive, told reporters in a concall.

The bank saw loans worth Rs 7,000 crore slipping into NPAs during the March quarter, taking the gross NPA ratio to 5.82%, from 3.78% a year-ago and from 4.72% at the end of the preceding quarter.

This led to a spike in the provisioning as per the norms to Rs 3,326.21 crore from Rs 1,344.73 crore in the year-ago period.

The bank said as much as 60% of the Rs 7,000 crore fresh slippages came in from the AQR, while Rs 2,700 crore came in from restructured assets slipping into NPAs. It continues to carry Rs 8,573 crore of restructured loans.

The first set of numbers from a large private sector underscore the fact that bad loan issues are not just limited to state-run banks, which had reported massive drop in profits due to AQR in the December quarter, when the private players were better off.

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