ICICI Bank has laid out a course correction plan and set specific targets for improving the health of the balance sheet by 2020, as bad loans zoomed during the last quarter of 2017-18.
This comes amid controversy over corporate governance practices regarding a loan extended to Videocon Industries in 2012, which led to speculation about CEO Chanda Kochhar’s continuation in the bank.
Ms. Kochhar remained unfazed during the post earnings media interaction and declined to answer if she would be continuing with her present term which ends in March 2019. She also said there are no discussion on the Videocon issue in Monday’s board meeting, while reiterating the board’s stance that gave a clean chit to the dealings.The bank’s board will meet once again on Tuesday to discuss the business plan and strategy for the current year.
In the fourth quarter, bad loans soared by ₹15,737 crore, which led to a 49% decline in net profit to ₹1,020 crore. Gross NPAs are now at 8.84%, compared with 7.89% a year earlier. Net NPAs are at 4.77%, compared with 4.89% a year earlier and 4.2% in December 2017. The course correction plan aims to reduce net NPAs to 1.5% by March 2020.
“The gross NPA addition has actually declined during the first three quarters of fiscal 2018,” Ms. Kochhar said.
“However, during the fourth quarter [of FY2018], gross additions to NPA were elevated at ₹15,737 crore.... the amount included about ₹9,968 crore of loans which were under the RBI scheme and which were classified as standard as on December 31, 2017.... the revised framework for stressed assets, issued in February 2018, had discontinued this scheme.”
The provision coverage ratio for NPAs was 60.5% compared with 53.6% a year earlier. The target is to improve it to more than 70% by March 2020. “We have made significant progress in derisking the balance sheet and the steps we had taken in the past few years are expected to impart stability to the balance sheet as the current cycle abates. We believe we are in a good position to increase our operating profit and reduce credit costs,” she said.
The bank’s net interest income was ₹6,022 crore in the quartercompared with ₹5,962 crore, while net interest margin was 3.24%.
‘Three anchors’
On the bank’s new strategy, Ms. Kochhar said, “Our strategy going forward will be anchored around three key anchors...preserve, change and grow.
“As far as preserve is concerned, we would like to preserve our robust funding franchise, and digital leadership. So, our target going forward is to maintain the average Casa [current and savings account] ratio above 45% and proportion of retail to total deposits over 70%”
On ‘change’, the bank had adopted a new strategy for corporate lending by setting up ‘hard’ limits to group exposure based on credit ratings and past track record. The share of retail loans will be increased to more than 60% by March 2020.
For growth, the bank would aim for an overall loan growth of 15% of which 20% would be retail.
