'There is 22 per cent rise in core profit'

Q&A: Chanda Kochhar, Managing Director and CEO, ICICI Bank

ICICI Bank Managing Director and CEO Chanda Kochhar speaks to Business Standard after announcing the bank’s third-quarter results. Excerpts:

Unlike some banks where an increase in net interest income (NII) offset the fall in treasury income, you have seen a 3 per cent rise in NII. Is asset contraction affecting the bottom line now?
The bottom line, if you look at it on a quarter-on-quarter basis, has not been affected. In fact, it has gone up from the first to the third quarter. If you look at the same quarter last year, treasury income was very large, while there is no treasury income this quarter. That is a reason why the bottom line has been affected. If you look at core operating profit, there is a 22 per cent increase.

What about consolidated results, which show a 26 per cent decline?
It’s again the treasury profit of ICICI Bank and ICICI’s primary dealership company. If you take out these two, there is no decline.

When will asset contraction end?
It will end soon. There has been a substantial rise in housing and car loan disbursements. In a few months, you will start seeing a pick-up in credit even on the corporate side.

What will be the growth in these three segments?
In home and car loans, there will be double-digit growth. In corporate loans, there’s a very substantial growth in approvals, but you will see the effect on disbursements in the next financial year.

What was the bank’s provision coverage ratio (PCR) at the end of December 2009?
After including technical write-offs, it is 62 per cent. We are awaiting a clarification from the Reserve Bank of India (RBI) on write-offs done during the current financial year, which were in the nature of technical write-offs. Excluding technical write-offs, it will be 52 per cent.

At the end of the last quarter, you said the bank would need Rs 1,700 crore additional write-offs to reach 70 per cent PCR. How much additional provision will you need now?
For the next three quarters, our residual provisions will take it from 62 per cent to 70 per cent. Subject to RBI clarification, we do not expect any additional burden.

How much bulk deposits have you retired?
We repaid around Rs 10,000 crore bulk deposits and fixed deposits this quarter.

What will be the growth drivers over the next three to six months?
We will continue to see a gradual improvement in fee income and NIM, and a reduction in provisions.

On cost-cutting side, have you reached the bottom or is there more scope?
On a percentage basis, we have probably done very well. You can’t reduce the percentage now.

You have identified infrastructure finance as a thrust area. Given the long maturity of these loans, there is fear of an asset-liability mismatch at the sector level. What are you doing on that front?
We have raised long-term resources through bonds and lines of credit from some global institutions such as Japan Exim. That’s the strategy we are going to pursue.

With credit growth expected to pick up, there will be some pressure on deposit mobilisation. Do you see rates rising since you have raised the deposit rate for one maturity?
An increase in one bucket should not be seen as an increase in interest rates. Interest rates will remain quite stable. I do not see much change now. May be next year, as credit picks up and liquidity gets used, you will see some increase in interest rates.

What is the retail-corporate loan mix like?
Retail is around 45 per cent, domestic corporate is 18 per cent, international corporate is 25 per cent. The rest is small and medium enterprises and rural.