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Home / Markets / Mark To Market /  ICICI Bank not kosher yet, despite good December quarter metrics

Even as a new chief starts to clean and fortify ICICI Bank Ltd, the shadow of former head Chanda Kochhar has come back to haunt it.

An independent committee headed by a former Supreme Court judge has found Kochhar guilty of circumventing the bank’s policies.

The allegations pertain to Kochhar extending loans to the Videocon group without disclosing her conflict of interest through the involvement of her husband.

The lender in a release has sought to allay fears, saying that there are no implications of this on the financials of the bank.

However, what will perturb investors is the initial unflinching support of the bank’s board to Kochhar, when it said last year, “ICICI Bank Board expresses and reposes full faith and confidence in its MD & CEO."

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(Vipul Sharma/Mint)


The only consolation for investors is that the bank made changes in its leadership before the findings of the report came out.

But some big questions remain on whether the board colluded or whether it was just in awe of a star leader. Another question is whether there is a risk of more skeletons tumbling out. The ongoing probe by the Central Bureau of Investigation (CBI) will act as an overhang too, especially since it reportedly involves the current leadership as well.

To be sure, ICICI Bank’s performance over the last three years has seen it pay for past mistakes.

New managing director and chief executive officer Sandeep Bakhshi in his clean-up drive has beefed up provisioning immensely. For the December quarter, provisions rose 19% and the coverage ratio is now an impressive 76%.

Clearly, he is leaving nothing to chance.

Delinquencies are far lower and gross bad loan ratio has improved to 7.75%.

It is evident that decks are being cleared for future growth and the 14% loan growth for the quarter underscores that.

Since the growth comes from the less-risky retail portfolio, which grew by 22%, the outlook on asset quality is positive.

But these positives seem to be already factored in the stock given that it has risen 14% in the last three months.

The worst may indeed be behind ICICI Bank but the stock is likely to take some heat from the conclusions of the report. Especially since the whole report has not been made public and a separate probe by CBI is on.

The scrip trades at a modest multiple of two times its estimated book value for FY20. That could change, provided ICICI Bank clears the air around its past quickly.

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