ICICI Bank writes off Rs 1,169 crore bad debt in June quarter

ICICI Bank: The country's second largest private sector lender has reported a 39.7% on-year growth in standalone profit at Rs 9,648 crore for quarter ended June FY24 despite elevated provisions & contingencies. Net interest income increased by 38% on-year to Rs 18,227 crore with net interest margin expansion of 77 bps on-year at 4.78%, while loan growth was 18.1% and deposits grew by 17.9% YoY. Asset quality was stable with gross NPA falling 5 bps sequentially to 2.76% and net NPA flat at 0.48% for the quarter.

ICICI Bank, which reported a 40 percent jump in profit on July 22, wrote off loans worth Rs 1,169 crore in the April-June quarter of the current financial year against Rs 1,126 crore in the year-ago period, the private lender said in its earnings report.

A loan is written off when the bank thinks that there is no scope for recovery from that particular account. Banks need to set aside money, called provisions, to cover losses from such accounts, which impacts their profitability.

The bank's management said the write-offs were routine. “The write-offs in this quarter is routine and is line with our policy. We had write-offs of Rs 1,158 crores in Q1 of FY23,” said Sandeep Batra, Executive Director, ICICI Bank, during an interaction with media after the result announcement.

The country's second-largest private lender's total recoveries and upgrades of non-performing assets (NPAs), excluding write-offs and sale, stood at Rs 3,511 crore in the April-June period compared to Rs 4,283 crore in the previous quarter, the bank said.

The provision coverage ratio (PCR), or the percentage of funds that a bank sets aside for losses due to bad debts, stood at 82.4 percent, higher than 79.6 percent in the year-ago quarter. A high PCR is a positive element for banks to buffer themselves against losses.

The total capital adequacy ratio stood at 17.47 percent and Tier-1 capital adequacy at 16.76 percent compared with the minimum regulatory requirements of 11.70 percent and 9.70 percent.

NPAs decline

The gross NPA ratio stood at 2.76 percent, lower than 2.81 percent in the previous quarter, indicating improving asset quality.

The net NPA ratio was 0.48 percent on June 30, 2023 compared to 0.48 percent on March 31, 2023 and 0.70 percent in June 30, 2022.

The net addition to gross NPAs, excluding write-offs and sale, stood at Rs 1,807 crore against Rs 14 crore in the previous quarter, the bank said. Gross NPA additions were Rs 5,318 crore compared to Rs 4,297 crore in previoys quarter, the bank said.

Net profit rises

The bank reported a net profit of Rs 9,648 crore for the June quarter, up 40 percent from the year-ago period and way ahead of market expectations of Rs 8,982 crore.

The lender’s net interest income (NII) — the difference between interest earned from loans and expended on deposits — grew 38 percent year-on-year to Rs 18,227 crore. The net interest margin was at 4.78 percent, up from 4.01 percent in the same quarter of the previous fiscal.