ICICI Bank posts first ever loss since listing in 2001 on bad loans

financial chronicle

Business, Economy

Gross bad loans as a percentage of total loans was 8.81 per cent.

India’s third-largest lender by assets, ICICI Bank reported a shocking net loss of Rs 120 crore in the three months to 30 June.

New Delhi: India’s third-largest lender by assets, ICICI Bank reported a shocking net loss of Rs 120 crore in the three months to 30 June, first time since its listing in 2001 on treasury hits, bad loans and consequent higher provisions, compared with a profit of Rs 2049 crore a year earlier.

ICICI Bank posted first-quarter (Q1) net loss on Friday on higher provisions for bad loans and treasury losses, it said in a statement. Gross bad loans as a percentage of total loans was 8.81 per cent at the end of June, compared with 8.84 per cent at the end of the previous quarter and 7.99 per cent a year earlier.

Provisions stood at Rs 5,971 crore compared to Rs 6,625.7 crore in the previous quarter. The bank said that it had chosen to increase the provision coverage ratio to strengthen its balance sheet.

While the gross additions to NPA at Rs 4,036 crore were the lowest in the last 11 quarters, additional provisions on existing NPAs as per Reserve Bank of India guidelines (ageing-based provisions and provisions for cases directed by RBI to be referred to the National Company Law Tribunal) resulted in total provisions of Rs 5,971 crore and a net loss of Rs 120 crore in Q1 FY19, it said.

Domestic advances rose 15 percent, while retail loans rose 20 per cent. The retail lending book is now 58 per cent of the bank’s loan portfolio—a significant shift from its focus on corporate lending a the start of the decade. The bank, like others, took a hit on its treasury portfolio and choose not to spread out the impact over four quarters as permitted by the RBI.

Mark-to-market losses on the AFS (available for sale) and HFT (held for maturity) portfolio aggregated Rs 219 crore in Q1 FY19. While RBI had allowed the banks to spread provisioning for such mark-to-market losses over up to four quarters, the bank provided for such losses in Q1 FY19 itself.

Total deposits increased 12 percent but the proportion of low cost deposits fell marginally. The bank’s current account and savings account (CASA) ratio was at 50.5 percent at end of the June quarter compared to 51.7 percent in the previous quarter.

The bank reported net interest income of Rs 6,102 crore in Q1 FY19 as compared to Rs 5,590 crore in the year-ago period. Overall, net interest margin dipped to 3.19 per cent in Q1 as compared to 3.23 per cent in the year-ago period.

In terms of asset quality, net NPA ratio decreased from 4.77 per cent of total advances in March quarter to 4.19 per cent in June quarter. The bank reported recoveries of Rs 2,036 crore in the June quarter.

Other income, which includes core fee income, rose 13.69 per cent to Rs 3851.81 crore in the three months ended 30 June from Rs 3387.91 crore a year ago. Post-provision, the net NPA ratio was at 4.19 per cent against 4.77 per cent in the January-March quarter and 4.86 per cent in the year ago quarter.

The bank recently appointed Sandeep Bakshi as its chief operating officer and asked him to report directly to the board while CEO Chanda Kochhar remains on leave. Kochhar proceeded on leave due to allegations of impropriety. At least two separate probes are underway into the allegations against her.

Kochhar first came under the scanner over stressed loans to the Videocon Group, whose promoter Venugopal Dhoot had business dealings with her husband. Later, a second whistleblower complaint emerged which questioned the bank’s practices in dealing with bad loan accounts. The complaint was disclosed by the bank to stock exchanges.