The bank expects its provisions to fall to 25 per cent of its operating profit in fiscal ended March 2022 from 34 per cent of operating profit currently as asset quality pressures ease, potentially improving its profitability. The bank has made total Covid related provisions of Rs 6500 crore while another Rs 3500 crore has been provided for unclassified non performing assets (NPAs) due to the Supreme Court (SC) stay.
“We expect some sort of normalisation in credit costs in FY22 based on current trends…a substantial part of vaccination will be over by then…the moratorium is over as customers have had four months to pay back and a rebound in economic activity is expected,” Batra said.
Results released on Saturday showed that the bank’s net profit grew 19 per cent year-on-year to Rs 4,940 crore in the quarter ended December 2020 from Rs 4,146 crore a year earlier due to a rise in interest as well as non interest income, even though provisions remained elevated.
Net interest income (NII) increased 16 per cent to Rs 9,912 crore from Rs 8,545 crore a year earlier led by a 15 per cent growth in domestic retail loans and a 10 per cent increase in corporate loans.
NII rose despite a drop in net interest margin (NIM) to 3.67 per cent from 3.77 per cent in December 2019 due to the impact of falling interest rates and surplus liquidity in the bank’s books.
Total other income increased 2 per cent to Rs 4686 crore from Rs 4574 crore in December 2019 led by a 44 per cent increase in treasury income to Rs 766 crore from Rs 531 crore in December 2019. The bank also gained Rs 329 crore from the sale of 2.2 per cent stake in its brokerage ICICI Securities during the quarter to comply for minimum public shareholding norms.
Gross NPAs were at 4.38 per cent at the end of December 2020 down from 5.95 per cent a year earlier. But including unclassified loans of Rs 8280 crore gross NPAs were 5.42 per cent. The bank added Rs 471 crore of to NPAs during the quarter.
About Rs 2200 crore of loans in the risky BB and below category taking the aggregate amount of such loans to Rs 18000 crore.
Batra said the bank had invoked restructuring on loans amounting to Rs 2546 crore or about 0.40 per cent of the total loan book out of which Rs 847 crore were retail loans. He declined to give an estimate on the amount of loans that could be added to the restructuring book.
“We have made a 15 per cent provision on these loans, higher than the 10 per cent mandated by RBI. We had guided for this restructured book to be about 1 per cent of our total book in September but it is much lower than that,” he said.
Batra said the bank will continue to follow a “risk calibrated” loan strategy without focussing on any particular segment.
“We are not looking at a particular mix retail or corporate. The higher amount of NPAs was very much expected give that it has been a difficult year. There have been problems but we have provided enough with about Rs 9000 crore. We will continue to grow are book and are comfortable with the risk we are taking,” Batra said.