Mumbai: ICICI Bank Ltd, India’s second-largest private sector lender by assets, was Asia’s best-performing bank stock on Tuesday after its top official said bad-loan ratios will improve.
At 11.28am, ICICI Bank shares were trading 7.19% higher at Rs310.20 on BSE. In intraday trade, the stock jumped 7.68% to Rs311.65, set for the biggest gain since 25 October, and was the top stock on Bloomberg’s Asia Pacific Banks Index.
Chief executive officer Chanda Kochhar, who has been assuring investors since 2015 that the bank has gained control over its bad-loan problem, guided that the net ratio will narrow to about a quarter of the current level over the next two years.
ICICI’s net income halved from the previous year to Rs1,020 crore in the three months ended 31 March, despite a Rs3,320 crore gain from the sale of the bank’s stake in its ICICI Securities Ltd unit, the Mumbai-based lender said in an exchange filing after the market had shut on Monday. Provisions more than doubled.
While the guidance on asset quality is comforting investors, it’s dependent on too many moving parts including timely resolution of stressed assets under India’s bankruptcy process, said Kranthi Bathini, director of Mumbai-based financial advisory company WealthMills Securities Pvt. “The rally may have limited legs as investors remain unhappy about the way in which the bank’s board addressed corporate governance issues.”
The bank’s bad-loan ratio rose to 8.84% from 7.82% at the end of December, the highest among top private lenders in the country, and compared with 1.3% at larger rival HDFC Bank Ltd. The soured assets have weighed on the bank’s shares, which are the worst performers among private-sector peers since May 2009, when Kochhar took over as CEO.
The Central Bureau of Investigation (CBI) has started a preliminary inquiry into allegations of impropriety over loans made to Videocon group, whose chairman Venugopal Dhoot had links with Kochhar’s husband, according to officials from the agency.
ICICI Bank didn’t comment on the investigations in the earnings statement. Kochhar declined to comment on the allegations in a subsequent conference call with reporters.
Any investigation could undermine investor confidence in the bank and have potential implications for funding costs and liquidity in an extreme scenario, Fitch Ratings Ltd said in a note on 9 April. The ratings company also flagged reputational risks, saying the bank board’s reluctance to support an independent probe has created doubts over the strength of the lender’s corporate governance practices.
ICICI Bank stock pared this year’s losses to 1.9%. The broader S&P BSE India Bankex Index has risen 1.4% this year. Bloomberg