Mumbai: ICICI Bank Ltd, India’s largest private sector lender, on Monday reported the highest quarterly increase in bad loans on a year-on-year basis in 10 years, suppressing net profit growth to an anaemic 2.37%.
The bank’s gross non-performing assets (NPAs) more than doubled to Rs32,178.60 crore in the three months ended 30 September from Rs15,857 crore a year ago. Gross NPAs made up 6.82% of the bank’s loan book, compared to 5.87% in the previous quarter and 3.77% in the year-ago quarter.
Total slippages, or new bad loans, during the quarter, including slippages from restructured loan book and watch list of corporate loans, stood at Rs8,000 crore.
At the end of the March quarter, the bank had created a watch list of loans worth Rs44,065 crore. These were sub-investment grade loans which were at risk of slipping into the non-performing loans category.
More than Rs9,100 crore of these loans turned bad during the first six months of the year and Rs2,461 crore of loans in this category got upgraded during the same period. The watch list of loans now was reduced to Rs32,490 crore at the end of the September quarter.
“From the two large deals, i.e. the sale of cement plant by Jaypee Prakash Industries and sale of Essar Oil, we expect significant reduction in portfolio over 6-9 months, subject to necessary approvals and subject to transactions getting completed. We have received some amount in October 2016 which are part of the planned repayment arising out of these resolutions,” said Chanda Kochhar, managing director and chief executive officer of ICICI Bank, in a call with journalists after the earnings announcement.
Kochhar added that the bank continues to focus on reducing exposure to stressed sectors like power, iron and steel, mining, cement and rigs. The total exposure to these sectors decreased from 13% at the end of March to 11.9% at the end of September.
As a result of higher slippages, provisions rose 651% from a year ago to Rs7,082.69 crore. This includes Rs3,588 crore of additional provisions made by the bank to strengthen its balance sheet.
This is over and above the contingency reserve of Rs3,600 crore that the bank created in the January-March quarter.
Despite higher provisions, the bank reported a marginal increase in profit in the July-September quarter, owing to the gains made from the sale of ICICI Bank shares in its life insurance arm.
The bank’s net profit in the second quarter rose to Rs3,102.27 crore from Rs3,030.11 crore reported a year ago. A Bloomberg poll of 19 analysts had expected the bank to post a net profit of Rs2,467.7 crore.
The bank reported its results after stock markets closed on Monday. ICICI Bank shares ended at Rs278.75 on the BSE, up 3.4% from its previous close.
The bank’s other income rose three-fold to Rs9,120 crore, including a gain of Rs5,682 crore from sale of its 12.63% stake in ICICI Prudential Life Insurance Co. Ltd through the IPO. Net interest income, or the difference between interest earned on loans and that spent on deposits, however, remained flat at Rs5,253 crore this quarter.
The fact that slippages from the regular loan book had been contained was a positive sign, said Siddharth Purohit, senior banking analyst, Angel Broking Ltd.
“Going by the current quarter, it seems the bank will largely be able to clean up the book and start looking at regular growth from H2 FY18,” Purohit said.