Trade Nivesh | Highlights of analyst call
The country's largest private sector lender ICICI Bank on January 25 reported healthy numbers in the quarter ended December 2019, barring a few concerns.
The bank’s profit during the quarter grew by 158.4 percent year-on-year to Rs 4,146.5 crore and net interest income increased 24.3 percent to Rs 8,545.3 crore, with loan growth of 12.6 percent YoY and net interest margin improving to 20-quarter high at 3.77 percent.
Asset quality improved with gross non-performing assets (NPAs) at 5.95 percent in Q3, the lowest in 14 quarters, declined from 6.37 percent in previous quarter. However, slippages increased to Rs 4,363 crore from Rs 2,482 crore sequentially, including one broking entity as well as a south based industrial company.
The management has guided for an increase in credit cost (NPA provisions) on account of lower recovery in NCLT cases. But this was guided by the management in the previous quarter as well that ex-NCLT recovery credit cost would be around 1.8-2 percent and with recovery from NCLT account it would be at 1.2-1.3 percent for FY20.
Here are the key takeaways from ICICI Bank's earnings call, collated by Narnolia Financial Advisors:
Management Participants: Sandeep Bakshi, MD
Slippages spiked in the corporate portfolio due to one brokerage client and a south-based industrial company. The brokerage company has been fully provisioned. The South India-based industrial company is servicing its due regularly, but has now been assessed to be restructuring, leading to classification as NPA. Watchlist slippages was Rs 707 crore.
The delinquency parameters across vintages in the personal loan and credit card portfolios have been stable and well within the internally defined thresholds. Increase in retail NPAs was on account of Kisan credit card and CV portfolio.
There was NPA deletion of Rs 845 crore due to compulsory convertible preference shares as a part of the debt- restructuring scheme. This account was fully provided.
Watchlist increased sequentially by 8 percent. There was Rs 2,666 crore downgraded from investment book category. Exposure to one account in the telecom sector downgraded to watchlist.
Recoveries & upgrades were Rs 4,088 crore, including a large steel account that was resolved under the IBC.
No disclosure on divergence in asset classification and provisioning for NPAs is required to be made.
Provisions during the quarter reflects the impact of full provision on the broking company exposure and provision on the industrial company, as well as recovery from the steel exposure under IBC.
The management increases credit cost guidance of FY20 from earlier range of 1.2-1.3 percent and expects it to be in the similar range of 9MFY20 because of recoveries from other than (Steel A/C) have not materialised as per expectation. Further, the broking company and south- based company has also impacted but would continue to target a normalised credit cost of about 25 percent of the core operating profit. The management is not hopeful of any major recovery in Q4.
The impact of interest on income-tax refund and interest collections from NPAs was about 10 bps this quarter compared to 6 basis points in Q2FY20.
The increase in non-employee expenses reflects the growth and franchise building in the retail business. There was a write-back in provisions for retrials due to increase in yields on government securities.
The decline in overseas book reflects the maturity of loans against FCNR deposits.
Ask an Expert : Trade Nivesh
The country's largest private sector lender ICICI Bank on January 25 reported healthy numbers in the quarter ended December 2019, barring a few concerns.
The bank’s profit during the quarter grew by 158.4 percent year-on-year to Rs 4,146.5 crore and net interest income increased 24.3 percent to Rs 8,545.3 crore, with loan growth of 12.6 percent YoY and net interest margin improving to 20-quarter high at 3.77 percent.
Asset quality improved with gross non-performing assets (NPAs) at 5.95 percent in Q3, the lowest in 14 quarters, declined from 6.37 percent in previous quarter. However, slippages increased to Rs 4,363 crore from Rs 2,482 crore sequentially, including one broking entity as well as a south based industrial company.
The management has guided for an increase in credit cost (NPA provisions) on account of lower recovery in NCLT cases. But this was guided by the management in the previous quarter as well that ex-NCLT recovery credit cost would be around 1.8-2 percent and with recovery from NCLT account it would be at 1.2-1.3 percent for FY20.
Here are the key takeaways from ICICI Bank's earnings call, collated by Narnolia Financial Advisors:
Management Participants: Sandeep Bakshi, MD
Slippages spiked in the corporate portfolio due to one brokerage client and a south-based industrial company. The brokerage company has been fully provisioned. The South India-based industrial company is servicing its due regularly, but has now been assessed to be restructuring, leading to classification as NPA. Watchlist slippages was Rs 707 crore.
The delinquency parameters across vintages in the personal loan and credit card portfolios have been stable and well within the internally defined thresholds. Increase in retail NPAs was on account of Kisan credit card and CV portfolio.
There was NPA deletion of Rs 845 crore due to compulsory convertible preference shares as a part of the debt- restructuring scheme. This account was fully provided.
Watchlist increased sequentially by 8 percent. There was Rs 2,666 crore downgraded from investment book category. Exposure to one account in the telecom sector downgraded to watchlist.
Recoveries & upgrades were Rs 4,088 crore, including a large steel account that was resolved under the IBC.
No disclosure on divergence in asset classification and provisioning for NPAs is required to be made.
Provisions during the quarter reflects the impact of full provision on the broking company exposure and provision on the industrial company, as well as recovery from the steel exposure under IBC.
The management increases credit cost guidance of FY20 from earlier range of 1.2-1.3 percent and expects it to be in the similar range of 9MFY20 because of recoveries from other than (Steel A/C) have not materialised as per expectation. Further, the broking company and south- based company has also impacted but would continue to target a normalised credit cost of about 25 percent of the core operating profit. The management is not hopeful of any major recovery in Q4.
The impact of interest on income-tax refund and interest collections from NPAs was about 10 bps this quarter compared to 6 basis points in Q2FY20.
The increase in non-employee expenses reflects the growth and franchise building in the retail business. There was a write-back in provisions for retrials due to increase in yields on government securities.
The decline in overseas book reflects the maturity of loans against FCNR deposits.
Ask an Expert : Trade Nivesh
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