Caution outweighs growth strategy at ICICI Bank

The slowdown in the growth of the Indian economy to 5.7% in the first quarter of the fiscal, the slowest in three years, is making both banks and companies cautious.

ICICI Bank, country's second-largest private sector lender, is conservatively growing its asset book while focusing on quality credit rather than grabbing every available opportunity to build the book, which once was its mainstay for growth. But the lender says they are pushing different levers to build a book that will give them few worries on repayments.

Non-interest income, including Rs 2,012 crore from the stake in ICICI Lombard General Insurance which was listed this year, helped prop up the profits of the bank in the second quarter of this financial year when its provisions doubled to Rs 4,502 crore from Rs 2,483 crore in the year-ago quarter. This was, however, lower than the Rs 5,682 crore that the bank raked in from the stake sale in ICICI Prudential Insurance a year ago in the same quarter, the main reason for the 34% fall in its net profit to Rs 2,058 crore in the July-September period.

The build-up of non-performing assets (NPAs) from its large corporate loans to various infrastructure projects has forced the bank to go slow and be selective on the clients it is funding. The loans to companies is one of the segments that have grown the slowest during the quarter.

The total incremental credit of the bank grew by Rs 18,705 crore during the quarter to Rs 482,780 crore, of which retail loans constituted about Rs 11,300 crore and the corporate book, Rs 6,944 crore. The domestic credit of the bank grew at 12.8% over the previous year at the time when peers saw their loans growing at over 20%. However, the CASA (current account and savings account) ratio of the bank touched 49.5%, with CASA growing at 24.2% over the previous year.

Chanda Kochhar, managing director and chief executive officer, ICICI Bank, sounded confident of strengthening the bank's balance-sheet by keeping a tight leash on the bad loan accretion. Addressing analysts, she said the bank was comfortable with the net interest margins, growth in fee income. The greatest relief, however, was on asset quality trends improving for the bank, though the bank is yet to get its risk-based supervision (RBS) report card from the regulator on its asset quality.

The gross NPA additions declined to Rs 4,674 crore during July to September period from Rs 4,976 crore in the previous quarter and Rs 8,029 crore a year ago. Of the total loan slippages, Rs 256 crore were from internally classified as below investment grade.

Gross bad loans rose to Rs 44,488.54 crore at the end of September, up 36.7% from Rs 32,547.50 crore a year ago. In the preceding quarter, they stood at Rs 43,147.64 crore. As a percentage of total loans, gross NPAs made up 7.87% at the end of September compared to 7.99% three months earlier and 6.12% in the year-ago quarter. The write-offs and sale of bad loans were at Rs 2,304 crore during the quarter.

NS Kannan, executive director, told analysts in the concall, "Our strategy is clearly good growth not at the cost of quality; that is something we are very clear about. We have pushed many levers if you really look at the kind of things we have done in the past few quarters where branch base sourcing had improved a lot. We have also mined our data to look at pre-qualified offers for our existing customers. For the full year, we expect to do anywhere between 18-20% growth."

TREADING SAFELY

• MD and CEO Chanda Kochhar said the bank was comfortable with the net interest margins, growth in fee income
   
• ED NS Kannan said the strategy is clearly good growth not at the cost of quality