ICICI Bank’s net profit shrank 76 per cent to Rs.702 crore for the quarter ended 31 March 2016, the lowest quarterly profit in a decade, owing to a sharp rise in bad loans.
The country’s second largest private sector lender had reported a net profit of Rs.2,922 crore during the year-ago period. The lender’s profit took a hit due to the Reserve Bank of India’s asset quality review (AQR) which asked lenders to classify many loans as non-performing.
“We have completed the review of classification of cases highlighted by RBI in the AQR. We continue to work towards resolution and reduction of exposure through sale of assets and deleveraging of corporate groups,” said Chanda Kocchar, MD & CEO, ICICI Bank during the post-earnings teleconference.
“While the bank is working towards resolution of stress of certain borrowers, it may take some time for the resolutions to be worked out. In view of these, the bank has, on a prudent basis, made a collective contingency and related reserve of Rs 3,600 crore,” Ms. Kochhar said. Some of the sectors that are under stress are iron & steel, mining, power, cement, among others.
Provision Provision for bad loans jumped 147 per cent to Rs.3,326.21 crore during the period under review.
The bank created a contingency reserve of Rs.3,600 crore for unexpected future provisioning and benefitted from deferred tax credit of Rs.2,199 crore. The bank has also sold loans of Rs.700 crore to asset reconstruction companies. The net profit also include sum received of Rs.2,100 crore by selling part of its stake in life and general insurance arm.
It reported an operating profit of Rs 3,781 crore.
Slippages during the quarter amounted to Rs.7,000 crore on the top of Rs.6,500 crore during the previous quarter. Slippages from restructured assets were at Rs.2700 crore.
The gross NPA ratio, as on end March was 5.82 per cent as compared with 3.78 per cent a year ago while net NPA ratio was 2.98 per cent compared with 1.61 per cent.
Ms Kochhar said the bank clocked to loan growth of 16.6 per cent for the financial year 2015-16, mainly driven by retail with home loans growing by 23 per cent and vehicle loans by 18.5 per cent. The bank reported a net interest margin of 3.37 per cent for Q4 as compared to 3.53 per cent in the previous quarter.
The board has cleared the proposal to list its life insurance subsidiary, ICICI Prudential Life Insurance Company.
“The intention is to file it (draft prospectus) this year,” Mr Kochhar said adding that the lender will continue to be a majority shareholder in the arm. The bank has appointed Vijay Chandok to the board as an executive director, while announcing that K. Ramkumar, Executive Director has opted for early retirement to pursue his personal interests.
