ICICI Bank Reports 8% Drop In Q1 Profit, Sees 'Positive' Trend On Bad Loans

ICICI Bank Ltd said it was optimistic about containing its bad loans after the three months to June saw the smallest rise in soured assets for seven quarters.The country's third-biggest lender by assets has the highest non-performing loans in absolute terms among non-state banks.

On Thursday ICICI reported an eight percent fall in first quarter profit from a year earlier to Rs. 2,049 crore, in line with analysts' estimates around Rs. 2,043 crore.

It added gross non-performing loans of Rs. 4,975 crore in the quarter, which Chief Executive Chanda Kochhar said was the lowest in seven quarters, reiterating the bank's guidance that incremental bad loans in the current financial year to March will be lower than the last financial year.

"As far as NPAs are concerned, actually the trend is very positive," Kochhar told reporters on a conference call, adding the bank had been selective in lending to corporates and was growing its retail loans faster.

Indian banks' "stressed" loans hit a record $150 billion at the end of last year, prompting the government to change rules and give the central bank more power to push defaulting companies to bankruptcy.

The Reserve Bank of India has ordered banks to initiate bankruptcy proceedings against 12 of the country's biggest defaulters that account for a quarter of the total non-performing loans and also to step up provisioning on those accounts.

ICICI Bank has outstanding loans worth Rs. 6,889 crore to nine of the 12 borrowers being taken to bankruptcy proceedings, Kochhar said. The bank had a provision cover of about 41 percent on those loans and would need to set aside Rs. 650 crore more over three quarters to meet central bank requirements.

Even as the bank's list of potential troubled loans to below investment-grade companies increased marginally to about Rs. 20,300 crore as of the end of June, Kochhar said they were encouraged by record loan recoveries during the quarter driven by infrastructure firm Jaiprakash Associates' sale of cement assets.

Gross non-performing loans as a percentage of total loans rose to 7.99 percent at end-June from 7.89 percent at March-end. However the net non-performing loan ratio narrowed to 4.86 percent at end-June from 4.89 percent in March.

ICICI Bank's domestic loans in the quarter grew 11 percent from a year earlier. Retail loans within that grew at a faster clip of 19 percent, it said.