The bank said it would focus only on investment-grade borrowers and plans to weed out its non-investment grade clients through a granular focus on its balance-sheet
Largest private sector lender ICICI Bank is pinning its hopes on two large corporate deals to see an improvement in its asset quality. The bank said the completion of the two already announced deals — Essar group, which is selling oil assets — and Jaiprakash Associates selling its cement unit - will help it substantially.
The bank, which announced its quarterly results on Monday, said it would focus only on investment-grade borrowers and plans to weed out its non-investment grade clients through a granular focus on its balance-sheet.
For the July-September quarter, the bank reported a 2.4% rise in net profit to Rs 3,102 crore aided by lower tax expenses and a one-time non-interest income gain of Rs 5,682 crore from the listing of the bank’s life insurance subsidiary. Tax expenses fell to Rs 451 crore from Rs 1,186 crore a year earlier due to deferred tax adjustments. The profits remained subdued due to a sharp rise in its provisions. Bad loans as a percentage of outstanding loans rose to 6.82% at the end of September from 5.87% at the end of June.
The provisions for the quarter rose nearly three times to Rs 7,083 crore from Rs 2,515 crore in the preceding quarter. This included Rs 1,678 crore for standard loans, Rs 395 crore set aside for the loss on sale of non-performing assets (NPAs) and Rs 1,515 crore of floating provisions besides the provisions for NPAs.
Chanda Kochhar, CEO& MD, ICICI Bank, said in a media concall, “In the next 6-9 months, we expect to reduce the exposure to below investment grade companies. We want to reduce exposure to companies in the stressed environment mainly in the power, iron and steel, mining, oil and rigs and metal sectors. We expect that the 2-3 deals announced (sale of Essar Oil and the cement business of Jaiprakash Associates) would reduce our exposure. We are also working on other resolutions.”
In absolute terms, the gross NPAs during the quarter jumped 18.3% to Rs 32,179 crore. The fresh slippages during the quarter stood at Rs 8,000 crore. The watch list in the September quarter was Rs 32,490 crore, down by Rs 6,233 crore from the preceding quarter. The slippages from the restructured book were at Rs 1,231 crore as against Rs 1,321 crore in the previous quarter.
According to Kochhar, about 80% of the slippages during the quarter came from the restructured book and the watch list. “During the quarter also the bank has continued to focus on its retail loan and selectively grown the corporate book, while we have reduced our international book.” The domestic retail growth during the quarter was at 21% while the domestic corporate growth was at 8.5%.
The other income has seen a threefold increase to Rs 9,119.7 crore over the previous year including gains of Rs 5,682 crore from ICICI Prudential Life Insurance IPO, by selling 12.63% of its shareholding.
Net Interest Income(NII), the difference between interest earned by the bank and the interest expended, increased marginally to Rs 5,253.3 crore. The net interest margin (NIM) fell further to 3.13% during the quarter, lower than the 3.16% in the preceding quarter and 3.52% in the year-ago period.
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