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ICICI Bank: Highest ever quarterly slippages lead to stress in the balance sheet

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A large part of the slippages came in from the stressed portfolio and led to a substantial fall in the residual stressed portfolio.

ICICI Bank: Highest ever quarterly slippages lead to stress in the balance sheet
ICICI Bank reported its highest ever quarterly slippages at Rs 15,737 crore compared to Rs 4,380 crore last quarter.
In Q2FY18 and Q3FY18, 18-20% of slippages — fresh additions to non-performing assets — came in from known stressed assets.
However, slippages from known stressed assets were 77% in the fourth quarter. This is a positive sign, as residual stress in the balance sheet is on the lower side.
Gross Non-performing Assets in absolute value rose 17.4% over last quarter to Rs 54,063 crore, and the GNPA ratio rose to 8.84% compared to 7.82% last quarter.
Total deposits grew by 14.5% for the year boosted by low cost deposits, which now form about 51.7% of total deposits, up from 50.4% last quarter.
Overall, stress in the balance sheet stands at Rs 13,365 crore, and accounts for about 2.6% of the loan book.
A large part of the slippages came in from the stressed portfolio and led to a substantial fall in the residual stressed portfolio.
Unlike the second and third quarters of 2018, where more than 80% of slippages came in from the normal standard book, in the fourth quarter, about 77% of slippages were recorded from the watchlist and the restructured book.
The watchlist fell by 75% this quarter to Rs 4,728 crore and accounts for  0.9% of the book.
Slippages of Rs 15,737 crore is the highest ever quarterly slippage for the bank. However, of this, Rs 9,968 crore came due to RBI’s circular on 12th February.
The bank classified three borrower accounts in the gems and jewellery sector as fraud amounting to Rs 794.9 crore and said it had made a provision of Rs 289.5 crore for the same.
The recognition of NPA’s means that leftover stress on balance sheet has reduced substantially. The Bank said it has total stress (including non-fund based exposures) of Rs 13,365 crore which forms about 2.61% of the book.
Large part of slippages come in from stressed portfolio leading to substantial decline in residual stressed portfolio
Slippages at Rs 15,737 crore is the highest ever quarterly slippage for the bank. However, of this, Rs 9,968 crore came due to RBI’s circular on 12th February.
The recognition of NPAs means that leftover stress on balance sheet has reduced substantially. The Bank said it has total stress (including non-fund based exposures) of Rs13,365 crore which forms 2.61% of the book.
Stress in the balance sheet is lowest in 9 quarters.
Alert: Bank and my calculation differs owing to inter-connected loans on which I don’t have the clarity
Low cost deposits share is the highest ever for the bank
Deposits grew by 14.5% YOY to Rs 56,0975 crore vs Rs 51,7403 crore. The Low cost deposits at Rs 2.9 lakh crore, up 17.5% YOY and 11.2% QOQ.
Low cost deposits share improved to 51.7% vs 50.4% YOY and vs 50.4% QOQ. Low cost deposit share is the highest ever for the bank in last 13 quarters.
Advances grew by 10.4% YOY to Rs 51,2397 crore. Loan growth was largely led by retail portfolio which grew by 20.6% YOY. International book de-grew by 13.6% YOY and 8.8% QOQ.
Earnings were ahead of estimates
Net interest income was at Rs 6,022 crore vs CNBC TV18 poll of Rs 5,863 crore. Loan growth coupled with highest ever share of low cost deposits aided in net interest income growth. Net interest margin improved by 10 basis points  QOQ to 3.24% vs 3.14% QOQ.
Domestic net interest margin improved by 17 basis points to 3.67% vs 3.5% QOQ. However, International NIM is as good as invisible, lowest ever for the bank as the bank is concentrating on de-growing its international balance sheet.
Fee income growth was in line with loan growth. Core fee income was at Rs 2,755 crore, up 12.6% YOY and 4.4% QOQ. The bank reported a net profit of Rs 1,020 crore vs CNBC-TV18 poll of a loss of Rs 13 crore.
 
Asset quality deteriorates due to highest ever quarterly slippages
GNPA is the highest ever for ICICI Bank, while provision coverage ratio is on the lower side in last 13 quarters. Gross NPA of the bank increased to Rs 54,063 crore vs Rs 46,039 crore, up 17.4% this quarter.
Gross NPA ratio rose to 8.84% vs 7.82% QOQ. Net NPA was at Rs 27,886 crore vs Rs 23,810 crore, up 17% QOQ.
Provision coverage ratio declined to 53.6% vs 60.9% QOQ. The management said that they intend to bring down net NPA to less than 1.5% by March 2020.
Domestic subsidiaries performance was healthy, however, UK subsidiary reported a huge net loss
Domestic subsidiaries reported a profit of Rs 916 crore, up 8.9% YOY, while ICICI Bank UK reported a net loss of Rs 3170 crore in Q4 FY18 due to higher provisions on Indian linked loans that it provided for in Q4.
Currently, CLSA, Nomura, Jefferies, Goldman Sachs, Axis Cap and Deutsche Bank have a "Buy" rating on ICICI. Morgan Stanley has an "Overweight" rating on the stock, while Credit Suisse  has an "Outperform" rating on the stock.
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