Jump In ICICI Bank Profit Hides Deteriorating Asset Quality

ICICI Bank Ltd. on Wednesday reported a nearly three-fold rise in profit even as bad loans on the books of the bank continued to rise.

The country's largest private lender saw its profit rise 189 percent to Rs 2,024.6 crore, compared to a year ago, according to its stock exchange filing. ICICI Bank had reported a lower profit in the comparable quarter last year due to a contingency reserve of Rs 3,600 crore it created for making provisions against bad loans.

While the bank reported strong growth in profits, its asset quality indicators worsened.

The gross non performing assets (NPA) ratio rose to 7.89 percent of the total assets compared to 7.2 percent in the previous quarter. In absolute terms, gross non performing assets increased 12.8 percent sequentially to Rs 42,552 crore.

However, the gross NPAs are net of write-offs, according to the bank's financial statement.

In a media conference call held right after the earnings, Chanda Kochhar, chief executive officer of the bank said that additions to gross NPAs have been elevated during the fourth quarter.

Rs 5,378 crore in gross bad loans were added due to a single cement sector account, the bank disclosed.

In addition to the cement account, there was a Rs 5,911 crore addition to gross NPAs, said Kochhar. Together, this means that the addition to gross NPAs during the quarter was at Rs 11,289 crore.

The headline number, however, was lower due to write-offs. The bank wrote off Rs 5,386 crore in loans in the fourth quarter alone, said Kochhar.

In terms of provisions, the bank's in its financial statement said that provisions during the quarter rose to Rs 2,898 crore, compared to Rs 2,713 crore in the previous quarter.

However, in the notes to accounts the bank said that it has used Rs 1,528.6 crore from the contingency reserve created last year to make provisions in the fourth quarter. The bank also used Rs 1,515 crore from a pool of floating provisions created in the second quarter of fiscal 2017.

Accounting for the provisions, the net NPA ratio went up 140 basis points to 4.89 percent.

The private lender's net interest income increased 10.3 percent over the same quarter last year to Rs 5,962 crore. The bank saw a 14 percent year-on-year growth in domestic advances, while its retail portfolio grew by 19 percent year on year.

Current account and savings account (CASA) deposits rose 28 percent year-on-year, said the bank in its press release.

The board recommended issuing one free share for ten shares held in the bank. It also recommended a dividend of Rs 2.5 per share, and a dividend of Rs 100 per preference share on 350 preference shares.