ICICI Bank’s profits jump by 26% in Q4 as NPA's decline, but the full extent of bad loans will only reflect in the coming months
- ICICI Bank's profits were in the green for its fourth quarter earnings.
- Its non-performing assets ratio also declined to 1.41% from 1.49% last quarter. However, experts expect the full extent of bad loans to only be reflected once RBI's three-month moratorium on bad loans comes to an end.
- The bank believes its strong deposit franchise and capitalisation will be enough to tide it through the coronavirus lockdown and impact on the Indian economy.
ICICI Bank’s share price ended in the end on Friday (May 8) trading 0.33% below the previous close. According to Macquarie, the private sector bank is one of the top ten stocks to buy with a target price of ₹438 over the next year.
Even though many expect the ratio of bad loans to increase in the near term once the Reserve Bank of India’s (RBI) moratorium on repayment of loans ends, ICICI Bank’s net non-performing assets (NPAs) decreased from 1.49% last quarter to 1.41% in Q4.
On the other hand, the private sector lender has increased in provisions by 186% from ₹1,083 crore in the last quarter to ₹5,967 crore this quarter. "This additional provision made by the Bank is more than the requirement as per the RBI guideline dated April 17, 2020," the bank said in its fourth-quarter filings with the BSE.
Around 32% of its customers have opted to delay repayments till after the lockdown, according to ICICI President Sandeep Batra during the earnings conference call.
The global ratings agency Moody’s believes that ICICI Bank’s retail-focused lending puts it as higher risk as incomes of many borrowers is now at risk due to the lockdown even though it has strong capital to back it up. “There will have to be a signification deterioration in asset quality to erode these buffers,” it said.
ICICI Bank also showed a year-on-year increase in term deposits of 29%. While current account deposits increased by 15%, savings account deposits grew by 11%. “The bank is well-capitalised and has a strong deposit franchise. The digital and technology platforms are key strengths of the Bank and the present scenario provides an opportunity to re-engineer the delivery of banking,” it said.
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