Bad Loans Cost ICICI Bank Rs 1.2 Billion in First Ever Quarterly loss

The ICICI Bank has reported its first ever loss, amounting of to Rs 1.2 billion, for June 2018, quarter on Friday (yesterday), on the cost of bad loans. The loss would have been higher if it weren’t for the profit of Rs 11.1 billion on the sale of its 2% stake in the life insurance arm, ICICI Prudential Life Insurance. The bank had made a net profit of Rs 20.49 billion in the same period, last year.

CBI registered a preliminary inquiry against the ICICI Bank, MD and CEO, Chanda Kochhar to investigate alleged conflict of interests in a Rs 3,250-crore-loan given by ICICI Bank to Dhoot's Videocon group. ICICI group veteran Sandeep Bakhshi was appointed as a whole-time Director and Chief Operating Officer (COO) for five years. He reports directly to the board in Kochhar’s absence.

The bank in a filing with the stock exchanges said that on a standalone basis, the bank's Net Interest Income (NII), or the interest earned minus interest expended, rose from 9.2 percent on a year-on-year basis to Rs 61.02 billion in the current quarter. This was due to 11.3 percent growth in net advances driven by a 20 percent rise in retail advances.

Moreover, the share of retail advances in the entire loan book increased to 57.5 percent as of June 2018 from 51.8 percent in March 2017. The Net Interest Margin (NIM), at 3.19 %, was down 5 basis points sequentially, and 8 basis point year-on-year. The NIM was aided by interest reversal on one of the Non-Performing Asset NPA accounts, and the management expects NIMs to remain under pressure in the coming quarters.

Though gross non-performing assets or bad loans as a percentage of total advances rose 82 basis points year-on-year in the first quarter to 8.81 percent, it was three basis points lower, sequentially. The bank doubled its provisions over the previous year’s quarter from Rs 26.08 billion in June 2017 to Rs 59.71 billion in June 2018 as it made additional provisions of Rs 7.06 billion for bankruptcy accounts.

The bank had outstanding loans of Rs 40.59 billion as was mentioned in the National Company Law Tribunal’s (NCLT’s) first list, and Rs 92.92 billion, in the second list. The bank said it had seen gross additions to NPA at Rs 40.36 billion, which were the lowest in the last 11 quarters.