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ICICI Bank posts record-high profit; expects normalisation of credit losses by FY22

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Profits after tax rose six-fold to Rs 4,251 crore despite a near 20 percent rise in provisions.

ICICI Bank posts record-high profit; expects normalisation of credit losses by FY22
The country’s second-largest private lender ICICI Bank posted a record-high quarterly profit on the back of a rise in operating profits and a decline in tax expenses. Profits after tax rose six-fold to Rs 4,251 crore despite a near 20 percent rise in provisions. The bank also made gains of Rs 305 crore by selling a 2 percent stake in ICICI Securities during the quarter.
"We expect normalisation of credit losses by FY22," Sandeep Batra, president, ICICI Bank sounded a positive note during a media interaction after the bank posted its second-quarter earnings. Alluding to the recovery seen during the quarter from peak-COVID lows, he said collection efficiencies had reached pre-COVID levels already.
"Post the easing of restrictions, there has been a substantial month-on-month increase in disbursements across retail products," the bank said in its statement.
Mortgage disbursements in Q2 FY21, for instance, crossed pre-Covid levels and reached an all-time monthly high in September 2020. Auto loan disbursements also increased from June 2020 to reach pre-Covid levels in September 2020.
"Disbursements across the rural portfolio have crossed pre-Covid levels in the months of August and September 2020. Credit card spends recovered to about 85 percent of pre-Covid levels in September 2020 led by increased spends in categories such as health & wellness, electronics, and e-commerce," the bank said.
As of October 28, the bank had sanctioned Rs 16,000 crore to 1.87 lakh borrowers under the Emergency Credit Line Guarantee Scheme, of which almost Rs 10,600 crore had been disbursed.
The bank has received restructuring requests for corporate and SME loans worth approximately Rs 2,100 crore so far, it disclosed during the analyst concall. When asked if more restructuring requests are expected by December 31, when the scheme ends, Batra said the bank was not expecting too many requests to come.
It added Rs 3,017 crore of fresh bad loans in the September quarter, compared to Rs 1,160 crore in the June quarter. Of the total bad loan addition during the quarter, a higher Rs 1,749 crore came from its retail book, and Rs 1,268 crore from the corporate and SME book.
ICICI Bank posted gross non-performing assets (NPA) ratio as a percentage of gross advances stood at 5.63 percent in Q2, compared to 5.99 percent in Q1. Its Net NPA ratio stood at 1.09 percent in Q2 versus 1.34 percent in Q1.
As a percentage of customer assets, its gross NPA stood at 5.17 percent and net NPA at 1 percent. "Including loans amounting to Rs 1,410 crore which was not classified as NPA pursuant to the Supreme Court's interim order, the gross NPA ratio on a proforma basis would have been 5.36 percent and the net NPA ratio would have been 1.12 percent at September 30, 2020. On a prudent basis, the bank made provisions of Rs 497 crore on these loans in Q2-2021," the bank disclosed.
The fund-based and non-fund based outstanding to borrowers rated BB and below (excluding non- performing assets) decreased to Rs 16,167 crore as of September 30, 2020, from Rs 17,110 crore on June 30, 2020.
ICICI Bank's domestic advances grew by 10.3 percent in the September quarter over last year led by a 12.8 percent rise in the retail loan book. Its global advances growth was 6.4 percent over last year, as the overseas loan book declined by 29.5 percent over the same period last year.
Net interest margin (NIM) declined sequentially to 3.57 percent in the second quarter from 3.69 percent in the previous quarter, reflecting surplus liquidity with the bank.
As of September 30, 2020, the bank held Covid-19 related provision of Rs 8,772 crore. Sandeep Batra told the media during the earnings call that the bank had not utilised any of the COVID-19 related provisions yet.
The bank said its board has approved a proposal to seek RBI nod for the re-appointment of Sandeep Bakhshi as managing director and chief executive officer from October 15, 2021, up to October 3, 2023. Already, the board and shareholders have approved Bakhshi's appointment up to October 3, 2023.
"Portfolio strands on asset quality have been strong. We believe that additional provisions made by the bank will completely cushion the balance sheet against any credit losses," Batra said.
"We see wide-ranging possibilities for risk calibrated growth going ahead,” he said when asked about the credit growth outlook. We do not give guidance on credit growth and we have been driving risk calibrated operating profit as a target, rather than credit growth in the bank," he added.
"We have adapted well, we were anyway a digital bank even before Covid, and this Covid has brought out our strength in a significant manner... What we are really trying to do is basic, simple banking. That seems to be working," Batra signed off.
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