ICICI Bank records a 250% rise in slippages

ICICI Bank, India’s largest private sector bank by assets, reported a 50% drop in standalone profit and a 250% rise in slippages in the quarter ended 31 March.

The bank’s net standalone profit for the quarter fell more than market estimates. The profit of Rs 1,020 crore is 50% lower than the same period last year. Brokerage firms Motilal Oswal and Sharekhan had estimated a drop of 32% and 34.7%, respectively.

The fall in profit was largely due to higher provisions of Rs 6,626 crore, a sharp rise from Rs 2,898 crore last year. Net interest income (NII) for the period stood at Rs 6,022 crore, marginally up from Rs 5,962 crore last year.

The bank said that the increase in slippages into bad loans or non-performing assets (NPA)—the quarter recorded Rs 15,737 crore as against Rs 4,380 crore in the previous period—is due to the new NPA recognition norms put forward by the Reserve Bank of India (RBI).

In a notice issued on February 12, RBI had directed banks to classify loans whose repayment is delayed by even a day as defaults. ICICI Bank said Rs 9,968 crore of NPA was classified as standard under the previous RBI schemes as on December 31, 2017.

The gross NPA (GNPA) of the bank was 8.84% for the quarter, better than Motilal Oswal’s expectation of 9.8%. The bank recorded a total gross NPA of Rs 54,063 crore—a 27% increase from the previous year’s Rs 42,551 crore.

The bank recorded recoveries and upgrades of Rs 4,234 crore. Another positive was a smaller watchlist of potential stressed loan (which the bank calls its drill-down list). It stood at Rs 4,728 crore, a sharp fall from around Rs 19,000 crore in March 2017 and Rs 44,065 crore in March 2016.

ICICI Bank is facing questions on corporate governance after a whistleblower alleged that its managing director and CEO Chanda Kochhar issued loans to Videocon’s Venugopal Dhoot in return for favours to her husband, Deepak Kochhar. Kochhar has not spoken on the issue yet, and the bank’s board has stood by her.

On Monday Kochhar did not answer a question on her future at ICICI, saying the bank has never discussed a CEO’s term at a press conference on quarterly results. She added that the board is clear in its decision to continue with the current leadership of the bank. Kochhar’s tenure as CEO ends in March next year.

ICICI Bank’s stock has fallen 6.8% since January 1, 2018. It closed at Rs 289.4 on the Bombay Stock Exchange on Monday, 2.3% higher than the previous business day.