ICICI Bank Q1 net falls 25% to Rs 2,232 cr, pressure on asset quality continues

ICICI Bank, country's largest private sector bank, reported a 25 per cent fall in net profit to Rs 2,232 crore in the April-June quarter as compared to Rs 2,976 crore in the same quarter a year ago.

The profit was almost in line with Bloomberg estimates at Rs 2,207 crore.

Net interest income, difference between interest earned and interest expended, remained flat at Rs 5,159 crore as compared to Rs 5,115 crore. Other income, mainly led by retail fees, increased by 15 per cent to Rs 3,429 crore.

Asset quality pressure continues to persist and gross bad loans as a percentage of total loans were 5.87% in the June quarter, compared with 5.82% in the previous three months. In absolute terms, the GNPA rose to Rs 27,194 crore as against Rs 15,138 crore in the first quarter of the previous fiscal.

In the quarter ended June, Net NPA also increased to 3.35 per cent against 1.58 per cent in the same period a year ago. Total provisions also increased as the bad loans piled up to Rs 2,515 crore in the quarter ended June as compared to Rs 956 crore in the same period a year ago.

The management believes that the pain may continue for some more time even as they continue recovery work. "There is continued uncertainty in the market, the commodity prices are low and the recovery process remains slow. We have formed a credit monitoring group under McKinsey to enhance monitoring group to spot early warning signals and improve the recovery process," said Chanda Kochhar, Managing Director & Chief Executive Officer of ICICI Bank.

This credit monitoring group will be working with the wholesale banking and the SME customer base to use data and analytics to improve the recovery process and stem the rise in bad loans.

In the last quarter, the bank had stated that it has a total exposure of Rs 44,000 crore to iron & steel, power, mining, rigs and cement sectors and it expected slippages from these five sectors. In this quarter ended June, there were slippages of Rs 8,249 crore out of which 76 per cent of the slippages were from these five sectors. At the end of the first quarter, the size of this watchlist after recoveries, upgrades and slippages now stand at Rs 38,723 crore.

The management also stated that the net loans to companies whose facilities have been restructured were Rs 7,241 crore during the quarter and the lender sold Rs 2,230 crore worth of stressed assets to asset reconstruction companies and recoveries during the quarter were Rs 800 crore.

Net interest margin, a key indicator of bank's profitability, declined to 3.16 per cent as compared to 3.37 per cent in the quarter ended March. The management hasn't given any guidance on margins but said that they expect the pressure on margins to continue.

The bank remains well capitalised with a capital adequacy ratio of 16.45 per cent. The management added that going ahead they will continue to unlock value in its subsidiaries.

On Friday, the lender's stock on BSE closed 3.4% lower at Rs 262.85.