ICICI awash with redmarks, net slips 13%, provisions up 8-fold

Even as bad assets continued to drag its performance, a Rs 5,682 crore gain from stake sale in its life insurance arm helped the top private sector lender ICICI Bank to limit its profit slip to 12.85 per cent at Rs 2,978.95 crore for the September quarter.
Despite the massive rise in provisions and fresh slippages, analysts described the overall numbers as on expected lines.
On standalone basis, the bank's net profit moved up marginally to Rs 3,102 crore for the reporting period.
The fresh slippages came in at Rs 8,000 crore, which resulted in the gross non-performing assets ratio to almost double to 6.82 per cent from 3.77 per cent last year.

Managing director and chief executive Chanda Kochhar said 80 per cent of the slippages came from the watchlist of Rs 44,000 crore it had declared at the beginning of the current fiscal year, and added that the bank expects some upside on the asset quality once the recent deals get consummated.
"We expect a significant reduction in this portfolio (the watchlist) over the next 6-9 months subject to necessary approvals and the transactions getting completed," she said, referring to Jaiprakash Associates' Rs 16,500 crore deal to sell cement unit to Ultratech Cement and Essar Oil's USD 12.9 billion sale to Russia's Rosneft-led consortium last month.

She informed that the bank has already received some amounts pertaining to the two deals in October.

The watchlist has now come down to Rs 32,490 crore on the back of repayments/upgrades of Rs 2,461 crore and NPAs of Rs 9,114 crore.
Its provisions rose nearly ninefold to Rs 7,082.69 crore from Rs 942.16 crore in the year-ago period but Kochhar said these include additional provisions of Rs 3,588 crore to "strengthen the balance sheet". The provision coverage ratio was at 59 per cent as of September.
The additional provisioning included Rs 1,678 crore for standard loans, Rs 395 crore for loss of sale of NPAs and a floating provision of Rs 1,515 crore, she said, clarifying this is over and above a Rs 3,600 crore contingency provision created in the last quarter of the last financial year.

In a note, Siddharth Purohit of Angel Broking said the
numbers are broadly in line with expectations, especially the reduction in the watchlist of stressed assets.
"Though fresh slippages jumped to Rs 8,000 crore, this was in line with our expectations. Though in absolute terms, slippages looks still high, the good news is that around 80 per cent of slippages has come from the watchlist and restructured book," he said, adding slippages from the regular loans have been contained to low level which is a positive sign.
While slippages and credit cost will remain high in the next quarters, it looks the bank will largely be able to clean up the book and start looking at regular growth from the second half of next fiscal year.

RBI's asset quality review last December led to massive reverses across the banking system as the lenders reported jump in NPAs and provisioning against them.
Its total income during the second quarter of the current fiscal increased to Rs 32,435 crore, as against Rs 25,138 crore in the year-go period, ICICI Bank said in a statement.
Core net interest income came flat at Rs 5,253 crore despite an 11 per cent growth in advances but impacted by a marginal fall in margins which came in at 3.13 per cent and a decrease in interest paying advances. Other income grew three times to Rs 9,120 crore, and grew by 14 per cent if the gains from the 12.5 per cent stake sale in ICICI Prudential through an initial public offer during the quarter, excluded.

A 21 per cent growth in retail advances led an overall loan growth story, while the corporate loan growth was 8.5 per cent. The bank said that excluding the stressed book, corporate loan growth came in at 20 per cent.
The bank will continue to focus on resolution of stressed advances and also reducing the concentration risk in the portfolio, Kochhar said, adding that its exposure to stressed sectors has now come down to 11.9 per cent from a peak of over 16 per cent in March 2013.
Among the subsidiaries, the life insurance arm's net was flat at Rs 419 crore, general insurance arm reported a net income of Rs 171 crore against Rs 143 crore. Its asset management arm posted an increase of 55 per cent to Rs 130 crore, while the profit from securities business grew to Rs 90 crore from Rs 60 crore in the year-ago period.

Share of the low-cost CASA deposits grew to 45.7 per cent of the base as against 45.1 per cent at the end of June. Its total capital adequacy ratio stood at 16.67 per cent with the core tier-I at 13.26 per cent.
There was buying on the ICICI Bank counter ahead of the results which were declared post-market hours. The scrip gained 3.36 per cent to close at Rs 278.75 on the BSE against a 0.7 per cent gain in the benchmark Sensex.