ICICI won't grow its balance sheet for another year

ICICI Bank, the country’s second-largest lender, is not looking to expand its balance sheet for the second year in a row and intends to reduce the share of unsecured loans.

The bank expects to still lend at least Rs 30,000 crore, which is close to the loan repayments it gets every year. During 2008-09, the bank’s loan book shrank by 3.2 per cent. “We get a lot of repayments every year, which is close to Rs 30,000 crore and even if we keep our balance sheet constant, we will do at least Rs 30,000 crore of lending, if not more,” Chanda Kochhar, who takes over as managing director & CEO of the bank on Friday, told Business Standard.

She said the bank would step up lending after it reworked its cost arithmetic by increasing the share of current and savings bank account (Casa) balances to one-third of the deposit base.

“The implementation of my strategy is in two phases. In the first phase, we get Casa to 32 to 33 per cent and till then maintain our balance sheet as constant. After that, we grow the balance sheet but simultaneously grow the proportion of Casa to 40 per cent,” Kochhar said.

Going forward, it’s back-to-basics banking for ICICI Bank. Apart from stepping up the share of Casa, the private sector lender intends to reduce its reliance on outside agencies for loan disbursals and is looking to use its branch network more effectively.

At the end of March, Casa accounted for 28.7 per cent of the bank’s total deposit base of around Rs 2,18,350 crore. As part of the strategy to lower the cost of funds, the bank has been shunning high-cost bulk deposits, which resulted in the deposit base shrinking by over 10 per cent during 2008-09. At the end of the last financial year, the bank managed to reduce the cost of funds by around 50 basis points to around 7 per cent.
 

ICICI’s BOOK
Retail book	Mar-2008	Mar-2009
Home loans	49.3	54.0
Auto loans	30.3	29.0
Personal loans	10.7	8.6
Credit cards	7.2	7.0
Others	2.5*	1.4**
* Loan against securities ** Includes small ticket personal loans and other secured loans Data for share in %                                                                               Source: ICICI Bank

Besides, the bank is rebalancing its portfolio and is reducing its reliance on unsecured loans such as small-ticket personal loans and credit cards. Kochhar said the share of unsecured loans in the bank’s retail portfolio was expected to fall to single-digit levels by the end of the current financial year, from 15-16 per cent at the end of March 2009.

ICICI Bank’s stock of advances at the end of the last financial year was Rs 2,18,310 crore, of which the share of retail advances was 49 per cent. On Saturday, Kochhar told analysts that there would be some deterioration in the unsecured loans and credit card portfolio during the current year.

Most banks have withdrawn from the unsecured loan market, owing to high delinquency rates and ICICI Bank has a high level of bad debt from the retail asset segment. Of the gross non-performing assets of Rs 9,929 crore, retail loans account for over 70 per cent.