‘ICICI Bank provisions to stay elevated’

In his first interaction with analysts after taking charge as chief operating officer (COO) of ICICI Bank, Sandeep Bakhshi said provisions will remain elevated in the current financial year. He also said that bad loans had almost reached their peak.

“The core operating profits of the bank continue to remain strong; however, provisions in FY2019 are expected to remain elevated,” Mr. Bakhshi told analysts in the post-earnings conference call. Banks have to set aside higher capital as provisions if loans turn bad.

‘Tail-end of cycle’

“We are at the tail-end of the NPA cycle… Going forward, we expect the additions to non-performing loans to be significantly lower,” he said. On Friday, ICICI Bank reported its first-ever loss of Rs. 120 crore for the quarter ended June 30, due to higher provisions.

Additions to gross NPA was Rs. 4,036 crore, which is the lowest in 11 quarters. Gross NPA was 8.81% as on June end as compared to 7.99% a year ago. Mr. Bakhshi said the bank will have to closely monitor the ‘BB [rated] and below’ portfolio of Rs. 24,629 crore and the impact of the revised framework for resolution of stressed assets issued by the RBI in February 2018.

ICICI Bank is in the middle of a raging controversy after allegations of conflict of interest against its CEO Chanda Kochhar which prompted the bank to set up a panel to look into the issue. Ms. Kochhar will be on leave till the probe is over and the bank has appointed Mr. Bakhshi as COO to run the operations.

Commenting on the recent controversies, Mr. Bakhshi said since the bank has operations and securities listing in multiple jurisdictions, it regularly engages with regulators in various matters.

“The bank has been responding to requests for information from the SEC investigatory staff regarding an enquiry relating to the timing and amount of the bank’s loan impairment provisions taken under U.S. GAAP.”

He said the bank evaluates loans for impairment under U.S. accounting norms (GAAP) for the purpose of preparing the annual footnote reconciling the bank’s Indian GAAP financial statements to U.S. GAAP.

“The bank has voluntarily complied with all requests of the U.S. SEC investigatory staff for information and interviews related to the bank’s U.S. GAAP loan impairment process,” he added.

Mr. Bakhshi assured investors that the day-to-day functioning of the bank had been insulated from these events and there had been ‘no material impact’ of the developments in the last few months on the business of the bank.

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