ICICI Bank sees bad loan additions falling significantly

During Q42017, the additions to NPAs have been elevated.

The largest private lender yesterday reported a five-fold jump in its March quarter profit at Rs 2,082.75 crore, but the asset quality pain, which had dented its bottomline a year ago, continued to persist.

During the March 2016 quarter, total advances were up 27% to almost Rs 75,000 crore, from around Rs 58,800 crore in March 2016 quarter. Such an account was over and above the provisions made for non-performing and restructured loans under RBI guidelines.

The gross non-performing asset ratio shot up to 7.89 per cent, from 5.21 per cent a year earlier, and 7.20 per cent in the December quarter. "This account was included in the drill-down exposures to key sectors disclosed by the bank and an M&A (merger and acquisition) transaction has been announced in respect of this company", the bank said.

Manish Agarwalla, Pradeep Agrawal, Paresh Jain analysts at Phillips Capital said, "Likely upgrades in watch list and strong operating profit along with gain from stake in general insurance business will provide enough cushions to the bank to provide for the stress asset in next 1.5yrs time frame". "Additions to NPAs will be lower, there will be more resolutions also in the current year", she said. "Those assets which were on the fringe (for ICICI Bank), will become better assets in the coming fiscal", Kant said.

Fee income increased by 11% on a year-on-year basis to Rs 24.46 billion (USD 377 million) in Q4-2017 from Rs 22.12 billion (USD 341 million) in Q4-2016.

The stock soared 9.24 per cent to end at Rs 297.95 on the BSE.

Several public sector banks have been struggling to cope with rising bad loans and higher provisions to cover for a risk of defaults. They said, "Overall pool of stressed loans is showing signs of stability, and bulk of NPA recognition is happening from watch list and OSRL".

The bank's gross bad loans as a percentage of total loans rose to 7.89 per cent as of end-March, from 7.2 per cent at the end of December and 5.21 per cent a year earlier.

  • Zachary Reyes