ICICI Bank disappoints, Q3 net down 4.4% as provisions soar

ICICI Bank today report a surprise 4.4 per cent fall in December quarter consolidated net profit at Rs 3,122 crore, as its provisions for stressed accounts rose three-fold after the RBI asked banks to recognise asset quality stress of large accounts.
The country's largest private sector lender warned of NPA pains in the March quarter as well.
The bank saw its gross non-performing assets (NPA) grow nearly three-fold to Rs 6,544 crore during the reporting period that also pushed total provisions to Rs 2,844 crore from Rs 980 crore a year ago.
Accordingly, gross NPA rose to 4.72 per cent from 3.90 per cent.

On a standalone basis, however, the post-tax profit rose 4 per cent to Rs 3,018 crore on the back of a 13 per cent growth in core net interest income (NII) at Rs 5,453 crore and a whopping 36 per cent jump in non-interest income at Rs 4,217 crore, largely due to the sale of its stake in insurance arms during the quarter.
Managing Director and CEO Chanda Kochhar told reporters that 60 per cent of the jump in gross NPA was due to the one-time review of asset quality stress undertaken by the RBI, after which it asked lenders to upfront recognise 150 accounts as non-performing and fully provide for them.

Net non-performing assets in Q3 rose to Rs 10,014 crore from Rs 6,828 crore in the September quarter, while net non-performing asset ratio rose to 2.03 per cent from 1.47 per cent in the previous quarter.

The restructured advances constituted Rs 1,355 crore of the overall slippages this quarter, and the total recast book now stands at Rs 11,294 crore.
The steel sector, which accounts for 4.5 per cent of its loans, contributed the most for the spurt in the asset stress, she said.
The RBI has given banks two quarters to identify the assets as non-performing, and Kochhar said the bank expects a similar spurt in stress in the March quarter as well, especially in loans to the power sector which accounts for 5.5 per cent of the asset book.

Unlike its smaller rivals like Axis Bank, ICICI Bank was not able to dip into a counter-cyclical buffer to protect its bottomline as it does not have such a reserve, Kochhar said.
"The bank disappointed on the asset quality front since
the gross NPA ratio rose by 95 bps to 4.72 per cent from Q2 while the net NPA ratio rose by 63 bps to 2.28 per cent.
"However, we have an 'Accumulate call' on the stock," Agrawal added.
ICICI Bank scrip dipped 1.7 per cent to Rs 232.95 on the BSE, whose benchmark Sensex slipped 0.1 per cent in a volatile trade.

The numbers were announced post-market hours.
Kochhar said while the news on the macro front is good, exposures to over-leveraged large corporates on big projects is proving to be a pain point for the bank and the depressed commodity prices only aggravates it.
Asked if the stance on stressed asset taken by the RBI is harsh, she said, "This is the regulator's view and all the regulated entities have to abide by it."
However, in what can prove to be succour for the bottomline in the next quarter, Kochhar said a gain of Rs 2,100 crore from stake sale in one of its insurance subsidiaries is yet to be taken on board pending mandatory sanctions from the FIPB.

There was no asset sale to any asset reconstruction company during the quarter, while the recast under the 5/25 scheme was under Rs 500 crore.
Assets with an underlying exposure of Rs 1,600 crore were taken over under the SDR scheme during the quarter under review, she said.
The retail advances grew 24 per cent in the October- December period and now occupy 44 per cent of the book, followed by 29 per cent to domestic corporates and 22 per cent to international branches.
The corporate loan book grew by 15 per cent to Rs 1.25 trillion, and consisted largely of refinance by better-rated corporates, where margins tend to get squeezed.

The lender was able to push up its net interest margins by 0.07 per cent to 3.53 per cent on a reduction in cost of funds and an expansion in the international book.
Kochhar, however, said the recognition of more NPAs and the beginning of marginal cost of funds-based rate calculations effective April 1 can hurt its margins next fiscal.
On the performance of its insurance subsidiaries, she said ICICI Life, the largest player in the private sector, reported a marginal drop in net at Rs 436 crore (from Rs 462 crore) despite an 11 per cent growth in premium income at Rs 3,344 crore.

Similarly, ICICI Lombard General Insurance Company maintained its leadership in the private sector, though it reported a fall in net at Rs 130 crore (from Rs 176 crore) despite a 21 per cent jump in gross written premium.