Mumbai: Over the past three decades, Chanda Kochhar has seen the country’s second largest private sector lender ICICI Bank Ltd through many a crisis, but none as personal as the recent allegations involving her husband, Deepak Kochhar, and the Videocon Group.
The bank stepped up its defence of Kochhar, with the board expressing full faith in her. That is hardly a surprise, given her long association with the ICICI Group.
Kochhar’s association with ICICI dates back to 1984, when she joined as a management trainee at Industrial Credit and Investment Corp. of India Ltd, or ICICI—which was to later become ICICI Bank Ltd. She was instrumental in setting up ICICI Bank in the 1990s and after getting the approval of the central bank, Kochhar played a key role in a range of matters—from selecting core software to finalizing the design of the bank cheques. One of her biggest achievements was to oversee the establishment of the bank’s retail franchise. She also led the efforts to expand the bank’s footprint to overseas geographies.
In 2000, Kochhar’s predecessor K.V. Kamath asked her to build the bank’s retail business from scratch. At that time, she was overseeing the corporate business that accounted for about 50% of the institution’s balance sheet and even more of its total profits. Between then and her taking over as chief executive officer (CEO) in May 2009, the share of retail loans in the book grew to nearly 49%. The share currently stands at over 54%. The story is the same on the deposit side with ICICI Bank being one of the top banks to have a large pool of low-cost deposits.
Kocchar, who won the Padma Bhushan award in 2011, is also known for leading other initiatives such as adopting 100 villages (later raised to 600) and providing them a digital ecosystem. She is also known for speaking about gender issues and talked about how ICICI has fostered a culture of gender equality.
A graduate of the Jamnalal Bajaj Institute of Management Studies, where she met her husband, Kochhar took the corner office in wake of the collapse of iconic US investment bank Lehman Brothers Holding Inc. which triggered the global financial crisis in 2008-09. It was not an easy task to fill in the big shoes of Kamath but Kochhar did that quite effortlessly and showed maturing by deciding to shrink the bank’s balance sheet. At that juncture, her focus was on consolidation as opposed to expansion. She had to face challenges on the human resource front, too, as many of her peers in management exited. She was quite unfazed though and diligently took the business forward.
Through these years, Kochhar waded through range of issues but the problem of bad loans stuck. Analysts view the problem in the context of the bank’s reliance on corporate credit, which was a legacy for ICICI Bank. While many believe it was a legacy issue, there are others who feel Kochhar misread the economy; she bet big on some of the projects which did not take off and the bank found itself saddled with a pile of bad loans. At the initial stage, she showed smartness in handling the situation. For instance, ICICI Bank sold off its Rs430 crore exposure in Kingfisher Airlines Ltd to Srei Finance in Kolkata, but there were not too many such cases.
Since Kochhar took over as CEO, bad loans have jumped from Rs9,416 crore in the June 2009 quarter to Rs46,039 crore in the December 2017 quarter. As a percentage of loans, gross NPA ratio was at 4.63% in June 2009 quarter which has risen to 7.82% in December 2017 quarter.Like most other banks, RBI’s asset quality review in late 2015 led to a rather sharp rise in bad loans for ICICI Bank.
At the time of rising bad loans in the Indian banking system, Kochhar ensured the conclusion of the sale process of the cement business of Jaiprakash Associates Ltd and Jaypee Cement Corp. Ltd to UltraTech Cement Ltd. For banks with higher exposure to the JP Group, this brought relief on the NPA front.
For shareholders, though, the rising NPAs had already taken some shine off ICICI Bank.
Since Kocchar took over, total returns (inclusive of re-invested dividends) for ICICI Bank are 255% compared to 427.9% for the Bankex. The gap has been accentuated by the recent controversy. After the controversy broke out, ICICI Bank shares have shed 5% in the past two weeks compared to a flat Bankex.