ICICI Bank Ltd, India’s second-largest private lender, posted a lower than expected profit as it set aside a high provision to cater for any virus-induced spike in bad loans.
The Mumbai-based bank reported net income of Rs12.21bn ($161.6mn) for the three months ended March 31, compared with a forecast of Rs35.1bn based on a Bloomberg survey of 16 analysts.
The lender’s board also approved raising as much as Rs250bn through privately placed local-currency bonds and $3bn in overseas markets, according to an exchange filing.
Indian banks are bracing for a surge in bad debt as the lockdown on the economy renders millions jobless and leaves many businesses facing bankruptcy. ICICI Bank set aside Rs59.67bn in provisions, including Rs27.3bn for possible bad debt as the pandemic continues to disrupt business activity, compared with Rs54.5bn provision a year ago.
Total loan book rose 10% compared to the same quarter last year.
“If there is no economic activity, the disbursements are going to clearly be limited,” said Sandeep Batra, president at ICICI Bank in an earnings call with reporters. “So, when you are lending incrementally, it will be to borrowers with a better profile both on the corporate and retail side.”
Its gross bad loan ratio was 5.53% at the end of March, compared with 5.95% at end-December. ICICI Bank’s capital adequacy ratio fell to 16.1% from 16.5% over the same period but net interest margin rose to 3.87% from 3.77% in the preceding quarter. The lender has fully provided against its exposure to the beleaguered oil trader Hin Leong Trading Pte Ltd, Batra said. According to the Singapore firm’s draft presentation to its creditors, ICICI Bank is owed $100mn.