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Analysis | ICICI Bank Q4 earnings show asset quality is under control, but COVID uncertainty looms ahead

During the call with reporters post the Q4 result announcement, ICICI Bank suggested there could be some impact due to COVID going ahead but it has a war chest ready to face the uncertainty.

April 25, 2021 / 07:48 AM IST

The recurring theme at the Q4 result conference call of ICICI Bank was the uncertainty associated with the COVID situation ahead.  This was evident when reporters asked the management about the guidance on growth and risks.  The bank management refused to make any forecast on growth but said it is prepared for rough weather ahead.

There is a war chest ready for use in crisis. The overall COVID provisions at the end of the March quarter now stands at Rs 7,475 crore with additional Rs 1,000 crore provisions added to the kitty in the fourth quarter. Not just for ICICI Bank, the COVID resurgence has put the whole banking industry, at risk yet again.

So far, ICICI Bank has done well on the bad loan front.

For the quarter ended March 31, the gross NPA (non-performing assets), as a percentage of total loans, has come down to 4.96 per cent in Q4 from 5.42 per cent (including the loans that were not tagged as NPAs following a court order or proforma NPAs) in the December quarter. Similarly, the net NPAs have declined to 1.14 per cent from 1.26 per cent in December quarter.

To repeated question on what will be the focus ahead, the bank management said it will look at quality loans across segments. That's the only logical response any banker can give at any stage because no one has any clue on the emerging scenario. If the COVID spread is contained and vaccination progresses as planned, things may not worsen. But no one, including the Government, seems to have certainty on this.


At the call, there was a hint on COVID second wave already showing an impact on the overall business environment in April which could mean the kind of aggressive growth seen on retail loans may not continue ahead. Going by the numbers, retail has done well (compared with the industry) in the fourth quarter, where the book grew by 20 percent year-on-year (YoY) and 7 percent sequentially during the quarter ending March 31, 2021. Retail loans comprised 67 percent of the total loan portfolio at March 31, 2021.

Including non-fund outstanding, retail was 55 percent of the total portfolio during the period. Growth in the performing domestic corporate portfolio was about 13 percent YoY driven by disbursements to higher rated corporates and public sector undertakings (PSUs) across various sectors, the bank said. Similarly, deposits grew by 21 percent on YoY basis. “In the medium term, we are optimistic about our proposition and outlook,” said the bank management on growth outlook.

ICICI Bank has shifted focus from riskier wholesale business to safer retail loans over years. It is aggressively tapping the digital channels to reach out to newer customers in pandemic era. The RBI ban on HDFC Bank in December on new digital launches, following frequent technical glitches, seems to have worked in its favour in the digital business.

To quote some numbers, digital channels like internet, mobile banking, PoS (Point of sale)  and others accounted for over 90 percent of the savings account transactions in FY2021. The volume of mobile banking transactions increased by 61 percent YoY in Q4-2021. The value of merchant acquiring transactions on UPI increased by 149 percent YoY in Q42021.

The bank is a market leader in electronic toll collections through FASTag. The electronic toll collections for the bank grew by 51 percent YoY in Q4-2021. It had a market share of 37 percent by value in this area in Q42021.

Moving ahead, the first quarter of FY22 will be key to watch for all banks as the pandemic second wave will likely take a toll on the fresh business acquisition and asset quality. The general consensus is that impact will be less severe this time compared to the last round as businesses are better prepared to face the lockdowns.

ICICI Bank’s war chest to fight the COVID uncertainty will give it the much-needed cushion, unless there are bigger negative surprises ahead.
Dinesh Unnikrishnan
first published: Apr 24, 2021 08:34 pm

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