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ICICI Bank Q4 net profit falls 50% on jump in NPAs, in line with expectations

ICICI Bank reported 49.6 percent year-on-year drop in net profit at Rs 1,020 crore for the fourth quarter ending March 2018. Net profit for Q4FY17 was Rs 2,024.60 crore.

Profits of the country’s biggest private sector bank were dragged by an 85-percent spike in provisions due to a 17-percent rise in ba

d loans.

The results were in line with estimates. A Reuters poll had estimated net profit at Rs 955.7 crore.

NII or net interest income inched up marginally to Rs 6,021.67 crore in the quarter from Rs 5,962 crore a year ago. It was projected to be marginally lower by about two percent to Rs 5,832 crore, as per the Reuters poll.

Non-interest income jumped 88 percent to Rs 5,678.6 crore (up from Rs 3,017 crore a year ago), supported by a one-time gains of Rs 3,320 crore from the sale of bank’s shareholding in ICICI Securities.

NIM or net interest margin increased to 3.24 percent as on end of March 2018, up from 3.14 percent in the quarter ended December 31, 2017 (Q3 FY18).

Slippages

Slippages into bad loans or gross NPA additions during the quarter was Rs 15,737 crore, constituting Rs 9,968 crore of loans which were under RBI schemes and were classified as standard on December 31, 2017.

Asset quality and loan growth

Gross non-performing assets (NPAs) worsened to 8.84 percent of total loans from 7.82 percent in the December quarter and 7.89 percent in the March quarter last year.

Commenting on the NPAs, Chanda Kochhar, MD and CEO of ICICI Bank said, “We will focus on reducing our net NPAs to below 1.5 percent by the end of March 2020.”

In absolute terms, gross NPAs jumped to Rs 54,063 crore, up from 46,039 crore in December quarter.

Net NPAs also deteriorated to 4.77 percent from 4.20 percent in the previous quarter and 4.89 percent last year.

Total domestic loan growth at 15 percent year-on-year at March 31, 2018, driven by the retail book which grew by 21 percent.

“We target to increase our retail exposure to more than 60 percent (from 57 percent) by March 2020… IBC (insolvency and bankruptcy code) is a positive step …and during FY19, we are hopeful that recovery will happen from the IBC cases,” she said.

Recoveries improve

Recoveries and upgrades from NPAs during the quarter under review improved substantially to Rs 4,234 crore, up 282 percent compared to Rs 1,108 crore in the previous quarter and 200 percent jump from Rs 1,413 crore in same quarter last year.

Watchlist reduces

The Bank’s drill-down list (watchlist) or potential list of bad loans decreased from Rs 44,065 crore at March 31, 2016, to Rs 4,728 crore at March 31, 2018. ICICI Bank rates them as loans below investment grade exposure in key sectors identified earlier and promoter entities.

“Large part of the slippages were from the drill-down list of accounts and sharp reduction in the outstanding troubled assets is a key positive development for the quarter. Recovery and upgradation also were strong during the quarter and the management intends to fasten the recovery process. Overall, we feel large part of the trouble is over for the bank.” Siddharth Purohit, research analyst at SMC Institutional Equities.

Videocon group-Deepak Kochhar loan controversy

When asked about the Videocon loan controversy, Kochhar said, “Our Board has made the stance very clear and there is nothing more to say.” She also stated there was no discussion on the controversy in the Board meeting today.

The ICICI Bank Board will also meet tomorrow on May 8. Kochhar said, “This is the beginning of the year and we always have a Budget planning meeting and hence the Board is meeting tomorrow.”

Dividend

The Board of Directors has recommended a lower dividend of Rs 1.50 per equity share of face value of Rs 2.00 each for March 2018. The dividend was at Rs 2.50 per equity share in March 2017.

The results were announced after market hours. ICICI Bank’s shares ended the day’s trade higher by 2.30 percent to close at Rs 289.40 per share, compared with 0.84 percent rise in the BSE Sensex.

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