ICICI Q4 profit tanks 76% on exceptional provision, NPA worsens

ICICI Bank 's fourth quarter earnings shocked the street on Friday with profit falling sharply by 76 percent to Rs 702 crore, impacted by exceptional provisioning of Rs 3,600 crore. 

Strong other income, operating profit and tax refund helped the company make profit during the quarter. 

Net interest income, the difference between interest earned and interest expended, grew by 6.4 percent to Rs 5,404.51 crore on yearly basis, supported by loan growth of 12 percent. The bank has continued to see robust growth in its retail business resulting in a year-on-year growth of 23 percent in the retail portfolio that constituted about 47 percent of loan portfolio while deposits growth was 16.5 percent in Q4. 

"We are targetting domestic loan growth of 18 percent in FY17," Chanda Kochhar, CEO and MD said while addressing press conference. The country's largest private sector lender missed analysts' expectations on all counts. According to analysts polled by CNBC-TV18, profit was estimated at Rs 3,115.1 crore (6.6 percent growth YoY) and net interest income at Rs 5,565.2 crore crore (9.6 percent growth YoY) for the quarter. 

Other income (non-interest income) shot up 46 percent year-on-year to Rs 5,108.93 crore and operating profit jumped 30 percent to Rs 7,107.50 crore in quarter ended March 2016. Other income was boosted by stake sale in insurance business. 

"The bank completed sale of 9 percent shareholding in ICICI Lombard General Insurance Company and 2 percent shareholding in ICICI Prudential Life Insurance Company. 

The aggregate profit from both the transactions was Rs 2,131 crore," it explained. Provisions for bad loans during the quarter increased significantly by 147.35 percent (up 17 percent QoQ) to Rs 3,326.21 crore compared to Rs 1,344.73 crore in year-ago period. Apart from regular provisioning, the bank has made a collective contingency and related reserve of Rs 3,600 crore during Q4-2016, over and above provisions made for non-performing and restructured loans as per Reserve Bank of India guidelines.

 "The weak global economic environment, the sharp downturn in the commodity cycle and the gradual nature of the domestic economic recovery has adversely impacted the borrowers in certain sectors like iron and steel, mining, power, rigs and cement," it reasoned. 

Asset quality also weakened in March quarter with gross non-performing assets (NPA) rising sharply to 5.82 percent (from 4.72 percent QoQ and 3.78 percent YoY) and net NPA climbing to 2.98 percent (from 2.28 percent QoQ and 1.61 percent YoY).

 In absolute terms, gross NPAs jumped 24 percent sequentially & 73.7 percent annually to Rs 26,221.25 crore and net NPAs increased 30.8 percent QoQ & 107.2 percent YoY to Rs 12,963 crore during the quarter, primarily due to continuing challenges in operating and recovery environment; and RBI's objective of early and conservative recognition of stress and provisioning. 

With this, the bank said it has now completed the exercise of review (asset quality review) of classification of cases highlighted by RBI. Slippages increased sequentially to Rs 7,000 crore in Q4 compared to Rs 6,544 crore Q3 and recoveries for the quarter were at Rs 781 crore.

 Kochhar said Rs 2,700 crore worth assets slipped from restructured book, adding the bank sold loans worth Rs 700 crore to asset reconstruction companies and slippages from asset quality review were at 60 percent.

 ICICI Bank has tax refund of Rs 520.60 for the quarter (including deferred tax credit of Rs 2,199 crore) against tax expenses of Rs 1,201.56 crore in corresponding quarter of last fiscal. At 12:30 hours IST, the scrip of ICICI Bank was quoting at Rs 236.95, down Rs 3.20, or 1.33 percent on Bombay Stock Exchange.