ICICI Bank: Is The Worst Over On The Asset Quality Front?

For ICICI Bank, much like its peer Axis Bank, quarterly slippages and pace of addition to stressed book have been in focus over the past several quarters. But ICICI Bank has delivered healthy core performance with a steady decline in bad loan book over the past few quarters.

- Radhika Merwin

In the latest September quarter, the bank saw a healthy 16 per cent growth in domestic loans, driven by 22 per cent growth in retail loans, leading to a strong 25.5 per cent growth in core net interest income.

Since the September quarter of last year, the bank’s bad loan book has been shrinking, while provision cover has gone up substantially.

As of September 2019 quarter, ICICI Bank’s bad loans stood at ₹45,639 crore, or 6.37 per cent of loans (against 8.54 per cent a year ago). While healthy core performance and falling slippages lend comfort, there are other trends that could weigh on earnings in the coming quarters.

One, ICICI Bank’s BB and below-rated corporate and SME book is still large at ₹16,074 crore as of September 2019 quarter. In fact, there has been a 5 per cent sequential increase in this stressed book in the September quarter. Two, recoveries are still low, while write-offs remain elevated.