ICICI Bank Q4 earnings today: Four things to watch

ICICI Bank will report its results for the fourth quarter of fiscal 2018 on Monday. Apart from the key numbers—profitability, gross non-performing loans, provisions and loan growth, commentary on the controversy surrounding chief executive officer Chanda Kochhar is awaited. At the bank’s meeting to approve the March quarter earnings on Monday, shareholders expect its board to clarify on conflict-of-interest allegations raised against Kochhar, Mint reported.

Profitability

ICICI Bank is seen reporting a drop in its fiscal fourth-quarter profitability because of higher provisioning for bad loans. According to a poll of 18 analysts by Bloomberg, the bank is expected to post a Rs1,060 crore profit for the March quarter, roughly half of its profit a year ago. In the December quarter, the bank had reported a net profit of Rs1,650 crore. Rise in bad loans along with provisioning for accounts referred under Insolvency and Bankruptcy Code is expected to keep credit cost higher, analysts said. However, the bank’s pre-provisioning operation profit for the fourth quarter is seen supported by a rise in non-interest income, which is likely to gain from ICICI Bank’s stake sale in ICICI Securities.

Asset quality

ICIC Bank is likely to see reversal in the trend of declining loan slippages seen in the previous three quarters, according to analysts. The rise in slippages is attributed to the Reserve Bank of India’s 12 February circular, where it withdrew host of restructuring schemes and has set a 180-day timeline for resolution. The circular has forced lenders to accelerate bad loan recognition in their some account, especially those which are part of the restructured books, said analysts. “The bank has 4.2% of its loans under its drill-down list. Thus, under the recent RBI circular we foresee both—slippages and credit cost to remain elevated,” said Centrum Broking Ltd in a pre-earnings report dated 10 April. ICICI Bank’s drilldown list, which includes loans internally classified as below investment grade, over Rs19,000 crore. The bank’s gross bad loan ratio was at 7.82% as at the end of December.

Loan growth

Analysts expect ICICI Bank continue with its double digit growth in domestic loans aided by heathy performance in its retail and small-and-medium enterprise credit portfolio. Lack of demand for big-ticket investments is expected to keep corporate loan growth moderate. However, it is expected to be better than most lenders. Meanwhile, the bank may continue to report a decline in its overseas book. ICICI Bank has not been growing overseas book over the last 12-18 months, it told analysts in January. As on 31 December, total loans of the bank stood at Rs5.05 trillion, a year-on-year growth of 10.5%.

CEO Chanda Kochhar

ICICI Bank conducts a conference call with media on its financial results. The call is attended by the key members of the management including CEO Chanda Kochhar. This will be Kochhar’s first interaction since the controversy, alleging her of conflict of interest in extending loan to a corporate group, broke. The bank has consistently denied the allegations and its board has defended its CEO. On 28 March, the board issued a statement reposing confidence in the corporate governance of the lender and the integrity of Kochhar. A spokesperson for ICICI Bank said that the allegations are not part of the board meeting agenda and are baseless and speculative in nature.