ICICI profits hit by sharp rise in bad loan provisions
Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.
ICICI Bank, India’s biggest private-sector lender by assets, has reported a quarterly slump in profits that provides fresh evidence of the stressed-asset problems assailing the country’s banking sector.
The bank reported net profit of Rs22.3bn ($333m) for the three months ending in June, down 25 per cent from a year before, writes Simon Mundy, the FT’s Mumbai Correspondent.
The profit fall was driven by a sharp rise in provisions for distressed loans, amounting to Rs25bn, which wiped out the impact of a lower tax bill than in the prior year period.
Loan provisions by Indian banks have risen sharply this year following an asset quality review undertaken late last year by the Reserve Bank of India. The central bank has set out to tackle the widespread practice of “evergreening” loans with no prospect of being repaid in full, and force banks to acknowledge the scale of the problem.
Non-performing assets at ICICI Bank rose to 5.87 per cent, up from 3.7 per cent a year before. While this is a higher ratio than that seen at several other private-sector banks, it is far lower than the average figure for the state-owned banks, which reached 9.6 per cent in March. The state-owned banks account for about 70 per cent of Indian banking assets.
Comments