Captains Speak     

Published: October 31, 2024
Updated: October 31, 2024

ICICI Bank

Our focus is on strong balance sheet

Non-performing assets of ICICI Bank are on the rise. During Q1FY25 there were gross additions of Rs 721 crore from the Kisan Credit Card portfolio. The bank typically sees higher NPA additions from this segment, particularly in the first and third quarters of a year.

This was indicated by Sandeep Bakshi, Managing Director and CEO, while addressing a conference call organized to discuss the performance of Q1 FY25. Asset quality may worsen during the Q2FY25 with the gross NPA ratio reaching 2.3 per cent as compared to 2.2 per cent QoQ and net NPA reaching 0.5 per cent versus 0.4 per cent QoQ.

Analysing the performance of the bank in Q1FY25, Mr Bakshi indicated that the bank’s strategic focus continues to be on growing profit before tax, excluding treasury, through a 360-degree customer-centric approach and by serving opportunities across ecosystems and micromarkets.

According to him, total deposits grew by 15.1% YoY and 0.9% QoQ at end-June 2024. The bank’s average liquidity coverage ratio for the quarter was about 123%. The domestic loan portfolio grew by 15.9% YoY and 3.3% QoQ at end-June 2024. The retail loan portfolio grew by 17.1% YoY and 2.4% QoQ. The business banking portfolio grew by 35.6% YoY and 8.9% QoQ. The SME portfolio grew by 23.5% YoY and 4.0% QoQ. The rural portfolio grew by 16.9% YoY and 3.4% QoQ. The domestic corporate portfolio grew by 10.3% YoY and 3.1% QoQ.

N.P.A. ADDITIONS

Pointing out that “the net additions to NPAs were higher, reflecting mainly the seasonal higher additions in the Kisan Credit Card portfolio and lower recoveries and upgrades compared to the previous quarter,” Mr Bakshi added that the total provisions during the quarter were at Rs 1,332 crore or 0.43% of average advances.

The provisioning coverage ratio on NPAs was 79.7% at end-June 2024. This includes the impact of the release of AIF-related provisions of Rs 389 crore during the quarter, pursuant to clarity on the regulatory requirements. Adjusting for the AIF provision release and CC provisioning, the credit cost would be about 50 bps for Q1FY25. The bank continues to hold contingency provisions of Rs 13,100 crore, or about 1.1% of total loans, at end-June 2024. Total provisions, other than specific provisions on fundbased outstandings to borrowers classified as non-peforming, were Rs 23,403 crore or 1.9% of loans.

Referring to the capital position of the bank, Mr Bakshi revealed that it continued to be strong with a CET-1 ratio of 15.92% and total capital adequacy ratio of 16.63% at end-June 2024, including profits for Q1FY25. The bank continues to make investments in technology, people, distribution and building brands. The bank is laying a strong emphasis on strengthening operational resilience for seamless delivery of services to customers. The bank will remain focused on maintaining a strong balance sheet with prudent provisioning and healthy levels of capital. It remains focused on delivering consistent and predictable returns to shareholders.

As regards the retail business, he revealed that within the retail segment, the mortgage portfolio grew by 14.2% YoY and 2.5% QoQ, auto loans 14.8% YoY and 1.7% QoQ, commercial vehicles and equipment 13.9% YoY and 2.2% QoQ, personal loans 24.9% YoY and 1.5% QoQ and credit card portfolio 31.3% YoY and 4.2% QoQ at end-June 2024. The personal loans and credit card portfolios were 9.7% and 4.4% of the overall loan book respectively at end-June 2024.

OVERSEAS LOANS

Referring to the overseas business, he said the overseas loan portfolio, in US dollar terms, grew by 5.4% YoY at end-June 2024. The overseas loan portfolio was about 2.8% of the overall loan book at end-June 2024. The non-India linked corporate portfolio declined by 9.0% on a YoY basis.

The gross NPA additions rose to Rs 5,916 crore in Q1FY25 from Rs 5,139 crore in the previous quarter. There were gross NPA additions of about Rs 721 crore from the Kisan Credit Card portfolio in Q1FY25. The bank typically sees higher NPA additions from the Kisan Credit Card portfolio in the first and third quarters of the year. Recoveries and upgrades from gross NPAs were Rs 3,292 crore in Q1FY25, down from Rs 3,918 crore in the previous quarter. The gross NPA additions from the retail, rural and business banking portfolio were Rs 5,732 crore in Q1FY25, up from Rs 4,928 crore in the previous quarter. These include the KCC NPAs of Rs 721 crore. The gross NPA additions from the corporate and SME portfolio were Rs 184 crore in Q1FY2025, down from Rs 211 crore in the previous quarter. The gross NPAs written off during the quarter were Rs 1,753 crore.

There was a sale of gross NPAs of Rs 114 crore in the current quarter compared to Rs 327 crore in the previous quarter. The sale of NPAs included about Rs 102 crore in cash. The non-fund based outstanding to borrowers classified as non-performing was Rs 3,543 crore at end-June 2024, compared to Rs 3,671 crore at end-March 2024. The bank holds provisions amounting to Rs 1,964 crore against this non-fund based outstanding.

The total fund-based outstanding to all standard borrowers under resolution declined to Rs 2,735 crore, or about 0.2% of the total loan portfolio, at end-June 2024 from Rs 3,059 crore at end-March 2024. Of this, Rs 2,325 crore was from the retail, rural and business banking portfolio and Rs 410 crore was from the corporate and SME portfolio. The bank holds provisions of Rs 863 crore against these borrowers, which is higher than the requirement.

According to him, the net interest margin was 4.36% in Q1FY25 compared to 4.40% in the previous quarter and 4.78% in Q1 of last year. The domestic NIM was 4.44% in Q1FY25 compared to 4.49% in the previous quarter and 4.88% in Q1 of last year. The cost of deposits was 4.84% in Q1FY25 compared to 4.82% in the previous quarter. Of the total domestic loans, interest rates on 50% of the loans are linked to the repo rate, 2% to other external benchmarks and 17% to MCLR and other older benchmarks. The balance 31% of loans have fixed interest rates

FEE INCOME UP

Fee income increased by 13.4% YoY to Rs 5,490 crore in Q1FY25. Fees from retail, rural, business banking and SME customers constituted about 78% of the total fees. The bank’s operating expenses increased by 10.6% YoY in Q1FY25 compared to 19.0% in FY24. Technology expenses were about 9.3% of operating expenses in Q1FY25. The branch count has increased by 64 in Q1FY25. The bank had 6,587 branches at endJune 2024.

Referring to treasury gains, Mr Bakshi revealed that these gains increased to Rs 613 crore in Q1FY25 from Rs 252 crore in Q1FY24, primarily reflecting realised and mark-to-market gains in equities and security receipts. The total outstanding to NBFCs and HFCs was Rs 85,412 crore at end-June 2024, compared to Rs 77,068 crore at end-March 2024. The total outstanding loans to NBFCs and HFCs were about 7.0% of advances at end-June 2024. During the current quarter, the increase in the NBFC portfolio was primarily due to lending opportunities at better pricing to high-rated borrowers and profitable opportunities in the bond market.

The builder portfolio, including construction finance, lease rental discounting, term loans and working capital, was Rs 52,130 crore at end-June 2024 compared to Rs 48,292 crore at end-March 2024. The builder portfolio was about 4.3% of the total loan portfolio.