Mumbai: ICICI Bank Ltd on Friday reported a larger-than-expected decline in September quarter net profit because of a smaller one-time gain and said it expects bad loan additions in the current financial year to be lower than last year’s.

Net profit in the quarter fell 33.7% from a year ago to Rs2,058.19 crore from Rs3,102.27 crore. The bank had been expected to post a profit of Rs2,570.10 crore, based on a Bloomberg poll of 21 analysts.

Net interest income (NII), or the core income a bank earns by giving loans, increased 8.7% to Rs5,709.07 crore from Rs5,253.27 crore a year ago. So-called other income declined 43.13% to Rs5,186.24 crore from Rs9,119.68 crore.

In the year-ago quarter, the lender had gained Rs5,682.03 crore by selling a stake in its life insurance arm. In the quarter gone by too, the bank booked a one-time gain that was much smaller. It raised Rs2,012.15 crore by selling a stake in its general insurance arm.

Unlike its private sector rivals Axis Bank Ltd and Yes Bank Ltd, ICICI Bank did not report higher bad loans in the three months. The lender is still waiting for the final report on the Reserve Bank of India’s (RBI’s) annual supervisory assessment of lender accounts, chief executive officer Chanda Kochhar told reporters, adding it will disclose the findings of the audit in the third quarter.

As part of this review, the central bank checks if banks have correctly classified loans, taking into account repayment trends and other factors. Banks may have to reclassify some loans as bad and raise provisions accordingly, as Axis Bank and Yes Bank did, in case of a divergence between their own and the RBI’s assessments.

Kochhar said ICICI Bank retains its earlier guidance that additions to non-performing assets (NPAs) this fiscal year will be lower than previous year’s. She forecast domestic loan growth in the financial year to be about 15%, led by as much as a 20% rise in retail loans.

“However the likelihood of divergences cannot be ruled in future for corporate lenders, given the total divergence across the industry is quoted at around Rs40,000 crore," said Anil Gupta, vice president-sector head (financial sector ratings) at rating company ICRA Ltd.

At ICICI Bank, gross NPA additions declined to Rs4,674 crore in the fiscal second quarter from Rs4,976 crore a quarter ago and Rs8,029 crore a year ago. Of the total loan slippages, Rs256 crore came from accounts that are internally classified as below investment grade.

Gross bad loans rose to Rs44,488.54 crore at the end of September, up 36.7% from Rs32,547.50 crore a year ago and Rs43,147.64 crore a quarter ago. As a percentage of total loans, gross non-performing assets (NPAs) made up 7.87% at the end of September compared to 7.99% three months earlier and 6.12% in the year-ago quarter.

Provisions and contingencies fell 36.42% to Rs4,502.93 crore from Rs7,082.69 crore a year ago. On a quarter-on-quarter basis, the figure surged 72.6% from Rs2,608.74 crore in the three months to June.

The bank said that it has exposure to 18 accounts that are part of a second list of defaulters compiled by RBI. The outstanding exposure to these accounts is Rs10,476 crore, and 98.7% of the amount is classified as an NPA. The bank has earmarked Rs3,299 crore to cover the risk of default against these loans.

Kochhar said that an additional provision of Rs651 crore, which was required to be spread across three quarters against nine accounts where banks have initiated insolvency proceedings, was made in the September quarter itself.

ICICI Bank shares rose 0.57% to Rs.300.95 at close of trading on the BSE on a day the benchmark Sensex edged up 0.03% to 33,157.22 points.

Reuters contributed to this story.

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