ICICI Bank Shares Drop on Bad Debts Rising in Fourth Quarter

ICICI Bank Ltd. dropped in Mumbai trading by the most in more than five weeks after India’s second-largest lender by assets reported an increase in bad loans for the fourth quarter.

Net income climbed 21 percent to 23 billion rupees ($424 million), or 19.87 rupees a share, for the three months ended March 31, from 19 billion rupees, or 16.46 rupees, a year earlier, Mumbai-based ICICI said in an exchange filing today. That compared with the 22.9 billion-rupee median of estimates compiled by Bloomberg.

The shares fell after the nonperforming-debt ratio widened to 0.77 percent from 0.73 percent. Chief Executive Officer Chanda Kochhar expanded ICICI’s loan book by 14 percent last year, focusing on retail banking as India’s slowest economic growth in a decade hinders corporate borrowing.

“There are concerns about some of the key performance parameters of the bank, like bad debts, and the situation doesn’t look like it will improve in the immediate future,” Jisha Nair, an analyst at BOB Capital Markets Ltd., said in a telephone interview in Mumbai. “We believe pressure will persist for the next couple of quarters.”

Shares of ICICI dropped 2.8 percent, the most since March 20, to 1,144.50 rupees at the close of trading in Mumbai. The stock has gained 36 percent over the past year, surpassing the equity benchmark S&P BSE Sensex index’s 13 percent advance.

The lender also reduced provisions to 4.6 billion rupees for the quarter, from 4.69 billion rupees a year ago. Net interest income rose 22 percent to 38 billion rupees.

Under Stress

“ICICI Bank has a large corporate exposure, which could put them under greater stress if the economy has a double dip,” Anil Agarwal, an analyst at Morgan Stanley, wrote in a note to clients before the earnings were announced. “The other risk would be an inability to grow consumer loans to mitigate a corporate slowdown.”

Loan growth for the bank and the industry won’t exceed 17 percent in the year that began April 1 as corporate borrowers are refraining from expanding and infrastructure projects have been halted, Kochhar told reporters in Mumbai.

“Demand for loans remains weak and many projects aren’t getting financial closure for various reasons,” Kochhar said. “The investment demand climate we believe will improve only in the second half of the year.”

India’s gross domestic product expanded 5 percent in the 12 months ended March 31, the least in a decade, according to government estimates.