ICICI Bank’s First Quarter Net Profit Falls 25%, Asset Quality Deteriorates
ICICI Bank net profit falls 24.9 percent in Q1.
ICICI Bank Ltd. reported a near 25 percent drop in net profit in the June quarter, as worsening asset quality proved to be a drag on interest income.
Net profit stood at Rs 2,232.5 crore compared to Rs 2,976 crore in the same period last year, according to the private lender’s filing to the Bombay Stock Exchange. The performance was in line with the Rs 2,207 crore consensus estimate of analysts tracked by Bloomberg.
Net interest income was flat compared with the same quarter a year ago at Rs 5,158 crore. It was below analysts’ estimate of Rs 5,424 crore. Net interest margins came in at 3.16 percent compared with 3.37 percent in the previous quarter.
ICICI Bank’s Chief Executive Officer, Chanda Kochhar said the slower pace of growth in net interest income was on account of rising bad loans and a conscious decision to allow the international business to contract.
When a loan is recogised as a bad loan, the bank stops accruing interest on it. This affects interest income.
Total advances grew 12.4 percent year-on-year to Rs 449,427 crore, but this was only driven by a 17 percent increase in domestic loans. The bank’s overseas loan book contracted by 1.5 percent year-on-year.
Asset Quality Worries
Gross non-performing assets as a percentage of total loans rose to 5.87 percent from 5.82 percent in the previous quarter. Net non-performing assets rose to 3.35 percent from 2.98 percent in the previous quarter.
Provisions for non-performing assets declined 24.4 percent sequentially to Rs 2,514 crore.
Total slippages during the quarter stood at Rs 8,249 crore, of which Rs 4,559 crore were fresh slippages.
Kochhar said a large portion of the slippages came from the bank’s watch list, which at the end of the quarter, stood at Rs 38,723 crore. She steered clear of any predictions on the number of slippages expected from the watch list, instead stating that the list simply comprised loans to borrowers whose ratings had fallen below investment grade.
The CEO said that there would also be recoveries from the watch list, adding that this was evidenced by the Rs 800 crore worth of recoveries in the first quarter.
ICICI Bank expects to achieve domestic credit growth of 18 percent for the full financial year. This is likely to be driven by retail loan growth, which has been pegged at 22 percent, Kochhar said.
The private sector lender will remain cautious on lending to corporates and on its overseas business. Kochhar expects the bank’s corporate loan book to grow in the lower double digits this year.