ICICI Bank to raise Rs 10,000 crore via bonds

I CICI Bank plans to raise up to Rs 10,000 crore via tier-1 bonds for its capital base and business growth.

Rating agency ICRA has assigned an ‘AA+ (hybrid)’ rating to the proposed offering of the private bank. It is described as a hybrid subordinated instrument, with equity-like loss-absorption features.

The distributable reserves that can be used to service the coupon in case of inadequate profit or a loss stood at a comfortable 10.4 per cent of risk-weighted assets as on June 30, ICRA stated. The reserves available for servicing the coupon (interest payments) improved from 7.7 per cent of risk weighted assets in March 2016 to 9.9 per cent in March 2017.

The capital adequacy ratio was sound at 17.89 per cent at June end, it added. The resource position was healthy, with the share of low cost deposits — the current and savings accounts — at 49 per cent as of end-June.  

The loan book at March end was Rs 4,64,232 crore, with a market share of six per cent in banking sector advances. 

The domestic loan book grew 10.9 per cent over a year during the April-June quarter. Overall growth in advances was moderate at 3.3 per cent, due to shrinkage in overseas ones of minus 25 per cent. So, the loan book stood at Rs 4,64,075 crore as on June 30.

The overall loan book is expected to expand by 10-12 per cent this financial year, higher than the estimated growth of seven to eight per cent for the banking sector, said ICRA. 

It expects the pressure on profitability to continue in the near term, due to asset quality challenges and consequent credit costs. However, operating profits are likely to remain stable. The bank has additional buffers in terms of high capital levels and an ability to monetise its investments, it added. 

With expectation of a limited decline in the cost of funds, the Net Interest Margins (NIMs) are expected to remain under pressure during the medium term. The repricing of existing floating rate loans and the lower level of income earning assets on account of slippage are impacting the margins.  

NIMs remained stable on a year-on-year basis at 2.9 per cent during the June quarter. It was 2.9 per cent in the same quarter a year ago and for the 2016-17 financial year.