ICICI's profit plunges the most in 15 years as provisions surge

Mumbai: ICICI Bank, India’s second-largest lender by assets, reported the biggest drop in quarterly profit in at least 15 years after setting aside reserves on top of provisions to cushion future defaults.
Net income fell 76 per cent to Rs7 billion ($105 million), or Rs1.2 a share, for the three months ended on March 31, from Rs29.2 billion, or Rs4.99, a year earlier, the Mumbai-based lender said in an exchange filing. That missed the Rs30.7 billion average of 25 analyst estimates compiled by Bloomberg.
Chief Executive Officer Chanda Kochhar is seeking to bolster ICICI’s balance sheet with additional reserves for future defaults at a time when the Reserve Bank of India (RBI), the nation’s financial regulator, is pushing lenders to ensure they have sufficient provisions against stressed assets. It is difficult to provide a guidance on defaults in coming quarters due to "volatility in the operating environment,” Kochhar said in a conference call after the results.
"Stressed assets will remain a drag on profit in coming quarters too,” Hatim Broachwala, an analyst at Nirmal Bang Institutional Equities Ltd. in Mumbai, said before the earnings were announced. "It is a challenge to cut bad loans and boost profit in an economic environment like this.”
ICICI shares fell 1.3 per cent to Rs236.95 as of 12:52pm in Mumbai, extending this year’s losses to 9.3 per cent. In comparison, the S&P BSE India Bankex Index, which tracks 10 lenders, fell 1.6 per cent this year.
The bank set aside Rs36 billion as buffer for possible defaults, the filing showed. ICICI’s gross bad-loan ratio widened to 5.82 per cent from 4.72 per cent in the previous quarter. By comparison, HDFC Bank, India’s most-valuable lender by market capitalisation, had a ratio of 0.94 per cent.