Mumbai: India’s largest private sector lender, ICICI Bank Ltd, slashed the performance bonus payouts for its senior management, including K.V. Kamath, managing director and chief executive officer; Chanda Kochhar, joint managing director and chief financial officer; and V. Vaidyanathan, executive director.
The bank’s annual report for fiscal 2008 shows a 22.49% dip in Kamath’s performance bonus. For Kochhar, the drop is 16.88% and for Vaidyanathan it is 5.5%.
Losing out: ICICI Bank’s Kamath. ( Hemant Mishra / Mint)
ICICI Bank had reported a 34% growth in its net profit for the year ended 31 March at Rs4,158 crore, against Rs3,110 crore in the previous year.
The bank’s shares have fallen close to 52% since January, while the Bombay Stock Exchange’s benchmark index, the Sensex, has lost a little more than 34%.
Meanwhile, the bank’s gross non-performing assets (NPAs), or bad loans, in the retail finance portfolio as on 31 March have increased to Rs5,552 crore from Rs3,114 crore in the previous year, amid a slowing of its mainstay consumer finance business.
ICICI Bank’s senior executives, travelling abroad, were not immediately available to comment on this story.
The board governance and remuneration committee of ICICI Bank determines and recommends to its board the amount of remuneration, including performance bonus and perquisites, payable to the whole time directors. The recommendations of the committee are based on evaluation of the directors on certain parameters, says the report, but it does not specify the parameters.
Mint couldn’t independently ascertain the reasons why the committee decided that the bonuses needed to be trimmed.
CHANGING TIMES (Graphic)
In a recent interview with Mint, Kochhar had hinted at “controlling” costs at the bank. “When the economy slows down, you’d need to realign your cost structure as, otherwise, you will be uncompetitive,” she had said.
Noting that the Indian information technology industry had led the way, Kochhar said that ICICI Bank has been paring employees’ bonuses and has become less liberal when it comes to giving raises.
Some analysts also point to a slowing of the bank’s consumer finance business. Consumer loans, mortgages and auto loans, which collectively accounted for about 69% of ICICI Bank’s total loan book two years ago, have now come down to 58%, and are set to go down further though the lender has also suggested this was planned.
“The growth rate of consumer credit will come down from 35-40% to 12-15% this year,” Kochhar had said.
Rising NPAs in the consumer finance business have also hit other firms such as Citibank NA and its non-banking finance arm, CitiFinancial Consumer Finance India Ltd.
The ratio of net NPAs to net advances at Citibank has increased to 1.23% in March from 1.02% in the corresponding period of the previous year, mainly because of higher delinquencies in its cards business.
Provisioning for the bank has increased to Rs319.9 crore in 2007-08 against Rs193.8 crore in the previous period. The bank’s gross NPAs for the period increased to Rs791.6 crore against Rs530 crore.
CitiFinancial’s net profit for the year ended 31 March dipped to Rs12 crore from Rs222 crore last year.
The fall has been largely due to higher delinquencies in the unsecured personal loan segment. On account of the losses, the non-banking finance arm of the foreign bank is now tweaking its business plan. It is also relocating some branches and carrying out greater credit checks.
ICICI Bank shares fell 1.64%, or Rs9.90 a share on the Bombay Stock Exchange on Tuesday to Rs593.85 a share.