A Bleeding Treasury Has ICICI Bank Group Net Plunging 27.5%

Representative Image.

Representative Image. (Reuters)

During the December quarter, many banks have been reporting reverses on treasury side due to the hardening of yields, which is expected to drill a Rs 15,000-crore hole into the system, according to analysts.

Mumbai: A massive 92 percent plunge in treasury income has whittled down other gains ICICI Bank has made in the December quarter, which pulled down net income by 27.45 percent to Rs 1,894.15 crore on a consolidated basis.

Even on a standalone basis also, net profit moved down to Rs 1,650.24 crore during the reporting quarter from Rs 2,441.82 crore.

Managing director and chief executive Chanda Kochhar attributed the dip in profit to the very low treasury income, which slid by over 92 percent to a low Rs 66 crore on hardening of yields, and also due to forex gains of Rs 82 crore which it had booked in the year-ago period.

During the December quarter, many banks have been reporting reverses on treasury side due to the hardening of yields, which is expected to drill a Rs 15,000-crore hole into the system, according to analysts.

She said the bank's core operating profit rose 10 percent to Rs 4,992 crore. However, on the asset quality side, the bank made considerable gains with a fresh addition to gross non-performing assets list came down to a nine-quarter low of Rs 4,380 crore.

Also, unlike its peers, the bank did not have to disclose any 'divergences' in NPA recognition from the RBI's risk-based supervision exercise which got completed during the quarter. She said none of the divergences which were found by RBI were beyond the 15 percent threshold set by the regulator, beyond which a bank has to disclose it as a divergence.

Of the fresh slippages, Rs 700 crore came in from a 'drilled down' list of low-rated accounts prepared by the bank, while the other corporate slippages were from accounts in the RBI schemes like S4A, 5/25, restructuring or SDR, chief financial officer NS Kannan told PTI, adding there were no chunky loans which slipped into NPA.

The drilled-down list was broadly flat at Rs 19,062 crore, while the exposure to RBI schemes stands at Rs 1,800 crore, he said, adding the bank does not expect any surprises on asset quality beyond these two lists of over Rs 20,000 crore which will be monitored closely.

The bank said it has a Rs 10,000 crore exposure to 18 accounts under the RBI-mandated second list of large cases to be resolved under the insolvency process, for which it made provisions of around Rs 500 crore during the quarter.

The overall provisions rose to Rs 3,569 crore from Rs 2,712 crore a year ago and the bank guided towards Rs 1,400 crore more of money being set aside in the fourth quarter for exposure to the second list of NCLT accounts.

Kannan said at present, overall provisioning for the NCLT accounts stands at 36 percent, which will have to be taken up to 50 percent by March, resulting in extra provisioning requirement in the March quarter.

Kochhar said the bank has provided adequately for its exposure in the first NCLT list of 12 accounts. Of these 12 accounts, bids have been received for four companies, she said, adding she expects the resolution process to show results in the first quarter of FY19.

Its core net interest income grew 6 percent to Rs 5,705 crore on a 10 percent overall loan growth and stable margin, while other income, which includes treasury gains, came down to Rs 3,167 crore from Rs 3,939 crore.

The domestic loan growth came in at 15.6 percent, a five-quarter high, and was driven by a 22 percent rise in retail advances, 15 percent on the corporate front and a 15.2 percent on the SMEs.

Kochhar said the corporate demand was from refinancing and working capital opportunities, and the bank expects to continue with over 15 percent domestic loan growth. Retail will continue to grow at 18-20 percent levels, while corporate segment will be up by over 10 percent, she added.

Net interest margin was almost stable at 3.53 percent on the domestic front and 3.14 percent on a blended basis.

The bank has been reluctant on foreign advances and "not actively growing the overseas" book, Kochhar said, adding the international loan book has come de-grown 14.5 percent during the quarter.

Kannan said from a peak of 28 percent, share of the overseas book has come down to 14.5 percent now.

Kochhar said RBI may hike interest rates with the firming up of inflation and will be keenly watching oil prices and fiscal deficit numbers from a price-rise management perspective.

The drilled down list has come down to Rs 19,000 crore from the initial Rs 44,000 crore, she said, adding Rs 7,000 crore of assets have been either recovered or upgraded from that list.

The bank's overall capital adequacy was at 17.65 percent with the core tier-I at 14.57 percent. Kochhar said it has no equity capital raising plans as of now.

Brokerage Reliance Securities said the bank surprised "negatively" with its core operating performance and credit costs. "Improving balance sheet matrix is not percolating down to operating profit level," it said.

The bank scrip closed 0.10 percent up at Rs 352.95 a piece on the BSE, as against a 0.19 percent correction on the benchmark.

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