Asset quality pressure up at ICICI, Axis Bank

Big private sector banks saw the quality of their loans worsen in the past financial year, ended March 31.

ICICI Bank, the largest private lender, had its gross non-performing assets (NPAs) rise 24 per cent to Rs 26,221 crore at the end of the March quarter, from Rs 21,149 crore at the end of the December quarter. Gross bad loans as a percentage of all loans rose to 5.82 per cent from 4.72 per cent in the corresponding quarter last year. Net NPAs increased to 2.98 per cent from 2.28 per cent in the quarter ended December.

Axis Bank saw its gross NPAs increasing to 1.67 per cent of the total in the March quarter, from 1.34 per cent a year before.

With the rising pressure on asset quality, the lenders had to set aside a higher amount of provisioning, impacting their profit. ICICI's quarterly drop was the biggest; Axis' net profit fell one per cent.

Analysts say what is worrisome is that both these large private sector lenders expect the pressure to remain in FY17. ICICI expects increase in slippage from loans worth Rs 44,000 crore. Axis has put Rs 22,600 of loans under watch.

On the other hand, smaller private lenders YES Bank and IndusInd Bank remain insulated, with gross NPAs below one per cent.

Also, in the quarter ended March, private banks have begun to see a growth in their corporate loan books after several quarters.

A major part of these continue to be working capital but banks are slowly seeing an uptick in term loans as well. Bankers say roads and renewable energy are sectors seeing good growth.

Another such area is in unsecured lending - credit cards and personal loans. In fact, the overall growth continues to be driven by retail (individual) loans, within which the unsecured segment is growing the fastest.