Markets
ICICI marks a sterling quarter but needs focus on retail NPAs
Summary
The upbeat sentiment surrounding the festival season has resulted in a 20% year-on-year growth in retail
CICI Bank Ltd’s September quarter performance had enough fireworks in terms of profitability. The reported net profit of ₹5,511 crore for the quarter was a historic high, according to the private sector lender. That it came on the back of a healthy 25% core income growth gives much comfort.
Indeed, balance sheet growth was stellar too, thanks to the lifting of the restrictions related to the second wave of the pandemic. The upbeat sentiment surrounding the festival season resulted in 20% year-on-year growth in retail. In essence, loans to individuals have continued to be the driver for ICICI Bank’s growth.
In a media call on Saturday, the management said that disbursements of home, auto and personal loans were close to those seen in the March quarter. Recall that the quarter was one of the best in terms of growth post the pandemic for most banks.
That brings us to a sticky problem that the lender faces and its investors should not take their eyes off it: Retail loans continue to be the biggest contributor to delinquencies for the bank. For the September quarter, slippages amounted to ₹5,578 crore, of which 83% was from retail and business banking.
To be sure, slippages are down sequentially and the lender has been able to increase its recoveries from retail.
That said, the retail portfolio is yet to demonstrate the steadiness of pre-pandemic levels. As the bank keeps its focus on retail loans, it needs to keep a closer eye on its defaults here.
On the other hand, lending to small businesses seems to be working for the bank and the portfolio has jumped 42%.
“Our ability to assess customer risk has improved since there has been a lot of formalization in the economy," said Sandeep Batra, executive director at ICICI bank.
