ICICI Bank likely to post sharp 53% drop in Q4 net profit, asset quality may worsen

ICICI Bank is expected to post a sharp decline of about 52.7 percent in net profit for the fourth quarter ending March 2018. This is because of the bank’s higher provisions towards bad loan losses.

The country’s largest private sector lender’s profit after tax as per a Reuters poll is estimated to be at Rs 955.7 crore, in comparison with Rs 2,024.60 crore in the same quarter a year ago.

Profits are likely to be hit because of high provisions for bad loans. The provisions are expected to jump by 146 percent year-on-year to Rs 7,131 crore, which would be doubled from the December quarter.

NII or net interest income is projected to be marginally lower by about 2 percent to Rs 5,832 crore from Rs 5,962 crore a year ago, the Reuters poll estimates

On the other hand, non-interest income is estimated to more than double to Rs 6,711 crore, up 122 percent from Rs 3,017 crore in the year ago quarter. The sharp rise is likely from the proceeds of stake sale in its subsidiary ICICI Securities through the initial public offering (IPO).

Full year poll estimates

For the full fiscal 2017-18, the poll projects a net profit decline of 25.9 percent to Rs 7,256.9 crore versus Rs 9,801.1 crore in the financial year ending March 2017.

NII for the full year is expected to increase by six percent to Rs 23,061 crore as compared with Rs 21,737 crore last year.

Result estimates by other brokerages

Brokerage firm Sharekhan has projected net profit to drop by 34.7 percent to Rs 1,322 crore and a 5 percent rise in NII.

On similar lines, Motilal Oswal sees a 32 percent drop in ICICI Bank’s net profit to Rs 1,380 crore led by elevated credit costs towards meeting their provision coverage ratio for the insolvency accounts, as well as high slippages from other stressed accounts.

The brokerage house believes that asset quality of the lender may worsen, projecting a jump in gross non-performing assets (NPAs) to 9.8 percent during the quarter under review, from 7.89 percent a year ago and 7.82 percent in the previous quarter.

Percentage of net NPA may deteriorate to 5.20 percent, from 4.90 percent a year earlier and 4.20 percent in the December quarter.

ICICI Bank under controversy

The ‘too-big-to-fail’ bank’s CEO and managing director Chanda Kochhar has been under the media glare on alleged charges of nepotism involving links between her husband and promoter of Videocon Group, which is a defaulting borrower of ICICI Bank.

So far, the bank’s Board has backed Kochhar ruling out any conflict of interest or quid pro quo in the loan transaction saying it “reposes full faith” in her and that these were “malicious and unfounded rumours” being spread to “malign the bank.”

On May 7, the bank’s Board will meet to approve the financial results for the full year ending March 2018 and it remains to be seen if the issue would be discussed in the meeting. In addition, if Kochhar speaks, it would be her first interaction in public since the controversy first came to light on March 28.

Changes in the board

In a latest development, ICICI Bank appointed Radhakrishnan Nair as an additional (independent) director of the bank for 5 years.

Last month, Amit Agrawal who was serving as the government’s nominee director on the board was replaced by Lok Ranjan, Joint Secretary, Department of Financial Services, without giving any reasons.

ICICI Bank stock performance

Since the allegations, the bank’s stock has recovered to the levels it was earlier trading at.

However, its subsidiary ICICI Securities has taken a major beating and has fallen over 17 percent since the shares listed on April 4, with a majority dip seen in the last one week owing to anchor investors trimming their stake in the company.moneycontrol