ICICI Bank Tumbles as Surge in Soured Debt Rattles Investors

  • Lender reported slowest quarterly profit growth in six years
  • Provisions almost triple to help meet regulator's goals

ICICI Bank Ltd., India’s largest private sector lender by assets, slumped after reporting the slowest quarterly profit growth in six years amid surging bad loans and a threefold increase in provisions.

Shares fell 3.9 percent to 224.15 rupees as of 9:41 a.m. in Mumbai on Friday, after tumbling as much as 7.4 percent earlier. They extended this year’s loss to 14 percent, compared with an 11 percent decline in the S&P BSE India Bankex Index, which tracks stocks of 10 lenders.

“Investors are rattled about rising stressed assets at ICICI,” said Hatim Broachwala, a banking analyst at Nirmal Bang Institutional Equities Ltd. in Mumbai. “The share price will fall in short term as the bank guided for a weak March quarter, with bad loan provisions eroding profits.”

Chief Executive Officer Chanda Kochhar is striving to boost profits as India’s lenders grapple with rising bad loan provisions amid the highest stressed-debt ratio in at least 14 years. A March 2017 deadline set by the nation’s central bank to bolster lenders’ balance sheets by increasing provisions for stressed assets and recovering bad debt also weighed on ICICI’s profit growth.

Similar Trends

Bad loans as a part of the total rose to 4.72 percent from 3.77 percent in the previous quarter, an exchange filing after trading hours on Thursday showed. Bad loan provisions at the lender in the quarter through December almost tripled to 28.4 billion rupees from a year ago as the bank tried to meet the Reserve Bank of India’s deadline.

"ICICI is complying with RBI’s articulated objective of early and conservative recognition of stressed assets,” Kochhar told reporters in a conference call after earnings announcement. “The rise in provisions was on account of this and similar trends can be expected in the March quarter also.”

Net income climbed 4.5 percent to 30.2 billion rupees ($443 million), or 5.17 rupees a share, in the three months ended Dec. 31, from 28.9 billion rupees, or 4.94 rupees a share a year earlier, the Mumbai-based lender said in an exchange filing on Thursday. That fell short of the 30.6 billion-rupee mean of 30 analyst estimates compiled by Bloomberg.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE