Mumbai: India’s ICICI Bank posted a 35.3% fall in quarterly profit on Saturday hurt by slowing loan growth, and said it expects moderate loan growth this year.
ICICI’s net profit fell to Rs744 crore ($149.4 million) in its fiscal fourth quarter ending in March, from Rs1,150 crore reported a year ago.
A Reuters poll of analysts had forecast net profit to fall to Rs770 crore.
New York-listed ICICI, which has slowed lending to rejig its advance portfolio as bad debts bite, sees corporate and retail loan growth at about 5-10%, joint managing director Chanda Kochhar told a conference call.
“This coming year we’ll be moderate in our loan growth,” she said. “Our strategy would be to conserve liquidity, conserve capital, contain risk watch how the economic scenario moves and actually focus on restructuring our deposit base.”
The bank’s loan book shrunk 3.2% during the whole year, which was a reflection of the bank’s strategy. “Given the current scenario, we think it is more prudent to really maintain the balance sheet size,” she said.
The bank’s deposit base fell 10.7 % during the year.
Reduced Dependence on Wholesale Deposits
The bank will focus on increasing its current and savings accounts deposits and lessen its dependence on wholesale deposits to reduce cost of funds and raise profitability, Kochhar said.
“This will be our growth engine for profit,” she said.
Retail loans, which account for 49% of its total loan book, reported a net loss during the quarter. However, they were expected to show a profit again from this quarter, Kochhar said.
The loss was due to the impact of the third quarter when cost of funds for the bank went up, but there was no increase in lending rates.
“It was a one-quarter impact,” Kochhar said.
In the quarter to March net bad debts as a percentage of net advances rose to 1.95% from 1.5% a year ago.
Net interest income, the difference between interest earned and interest paid, rose 2.9% to Rs21.39. Net interest margin, a key measure of efficiency rose to 2.6% from 2.4% a year earlier.
The bank’s fee-based income also fell during the quarter by 30% from year ago due to reduced investment and acquisition financing activity in the corporate sector and lower level of fees from retail products distribution.
The bank named executive director V. Vaidyanathan as head of its life insurance joint venture with Prudential after the managing director of the unit quit to join Axis Bank.
Sandeep Bakhshi, who is heading the life venture now, takes over as the bank’s executive director, while Bhargav Dasgupta, now executive director of the life insurance venture has been appointed the head of its non-life venture with Lombard.
All the appointments are effective from 1 May, the bank said.
Chief executive KV Kamath takes over as chairman of the bank in May with Kochhar as CEO and MD.
Shares in ICICI, which has a market value of about $9.4 billion, are down 3.5% so far this year, compared with a 17.4% rise for the benchmark and a 2.5% rise in the sector index.
The stock closed 2.1% higher at Rs432.50 on Friday in a Mumbai market that firmed 1.7%.