ICICI Bank quarterly profit misses estimates as provisions soar

A man speaks on the phone outside an ICICI Bank branch in Kolkata, India

India’s ICICI Bank Ltd on Saturday reported a quarterly profit that missed analyst estimates as its provisions for bad loans rose sharply to account for the impact of the coronavirus pandemic.

Net profit at the country’s second-largest private lender for the quarter ending June 30 was 25.99 billion rupees ($347.69 million) compared with a profit of 19.08 billion rupees ($255.25 million) in the same period a year ago, the bank said in a regulatory filing.

That fell well short of an average of 27.47 billion rupees estimated by 24 analysts, according to Refinitiv data.

The bank’s quarterly provisions jumped to 75.94 billion rupees from 34.96 billion rupees a year ago.

The additional provisions were “with the objective of completely cushioning the balance sheet from the impact of COVID-19,” President Sandeep Batra said on a post-earnings conference call.

“We continue to live in uncertain times,” he said. “From our perspective we wanted to be prudent and that is the reason why we made this provision.”

The total capital adequacy ratio of the bank was at 16.32% well above the minimum regulatory requirement of 11.08%.

Asset quality improved marginally with gross bad loans at 5.46% compared with 5.53% in the quarter ended March. Net non-performing assets also fell to 1.23% from 1.41%.

Asset quality of banks in India is expected to take a severe hit due to the coronavirus-led economic crisis. The country’s central bank has warned the bad loans in the banking system could soar to almost 15% of total loans by March 2021.

Net interest margin, a key indicator of the bank’s profitability, grew to 3.69% in the quarter, from 3.61% a year earlier, helped by an increase in deposits and weak credit demand due to a nationwide lockdown to curb the spread of the virus.

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