ICICI net rises 14% but bad loans up

ICICI Bank, the country's largest private sector lender, said on Friday its consolidated net profit for the quarter ended December 31, 2014, rose 14 per cent from a year earlier to Rs 3,265 crore.

On a standalone basis, the net profit was up 14 per cent from a year before, at Rs 2,889 crore.

Higher net interest income, a better margin and growth in retail advances aided the earnings. Net interest income increased by 13 per cent over a year before, to Rs 4,812 crore. Net interest margin improved by 14 basis points to 3.46 per cent and the management says it can maintain this. Non-interest income increased by 10 per cent to Rs 3,091 crore.

However, a rise in bad loans kept investors worried, with the bank's stock falling five per cent in Friday’s trade. The gross non-performing assets (NPA) ratio was 3.4 per cent at the end of December, compared to 3.12 per cent a quarter before and 3.05 per cent a year earlier. The net NPA ratio also deteriorated, rising to 1.27 per cent, from 1.09 per cent at the end of September and 0.94 per cent at the end of December 2013.

“In the challenging operating environment, prolonged economic slowdown and the uneven recovery that has been witnessed, we have seen higher slippages from the restructured portfolio. As a result, a large part of NPA is not new additions but actually the restructured assets becoming NPAs. We believe this trend might continue for the next two-three quarters,” Chanda Kochhar, managing director & chief executive officer, said in her post-earnings comments.

In the first nine months of this financial year, the total NPA addition was Rs 5,147 crore. Of these, Rs 2,292 crore was slippage from restructured accounts; the rest were additions. In October-December, gross NPA addition was Rs 2,279 crore, of which loans of Rs 776 crore were slippages from the restructured book.

Kochhar said the additions to restructured assets and NPAs in the current financial year were unlikely to top that of 2013-14. The loan restructuring pipeline is currently Rs 2,300 crore.

During the quarter, there were upgrades of Rs 507 crore, while Rs 183 crore was written off. The bank also sold loans worth Rs 50 crore to asset reconstruction companies.

Provisioning increased to Rs 980 crore in October-December from Rs 695 crore in the same period a year earlier. “Of this, Rs 140 crore was on account of standard assets and a very small sum for unhedged foreign exchange. The rest was on account of NPA,” Kochhar said.