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India's ICICI Bank posts record profit on expected dip in bad loans

[MUMBAI] ICICI Bank posted a record quarterly profit as it set aside a lower amount of funds for potential bad loans even as the coronavirus pandemic constrains growth in the financial sector.

Net income at India's second-largest private lender rose to 42.51 billion rupees (S$778.6 million) in quarter ended Sept 30 from 6.55 billion rupees a year earlier. That was about 48 per cent higher than the 28.7 billion rupee estimate of 14 analysts surveyed by Bloomberg.

The bank, which raised 150 billion rupees in August to bolster its capital ratios, set aside 29.95 billion rupees, nearly a third of 75.94 billion rupees of provisions in the previous quarter. ICICI Bank had pegged it at 25.07 billion rupees a year earlier. The gross bad loan ratio was also lower at 5.17 per cent, compared with 5.46 per cent at the end of June. Net interest income rose 16 per cent from a year ago.

The lender did not make any additional provisioning for Covid-19 induced bad loans as it had "frontloaded" them in June quarter, said Sandeep Batra, President of ICICI Bank, adding that he expected a "more normalised" financial year starting April 1. Lower tax payout in the second quarter from a year earlies also helped the bottomline.

"We are focused on risk calibrated growth," Mr Batra said adding that the bank saw its highest ever home loan disbursements in September. "Covid related impact won't be there next year as economic activity is coming back." Revival of consumer-led demand ahead of festive season helped India pick up speed in September from the pandemic-induced slump.

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Despite a six-month loan moratorium, an extension to the relaxation of rules surrounding bad loan classification and a loan restructuring programme, many banks are turning more cautious when lending to avoid further asset deterioration.

Banks came into the year already weakened by a two-year-old shadow lending crisis that had eroded capital. Struggling with the worst bad loan ratios among major nations, Indian lenders have been rushing to raise capital and curbing their risk appetite.

The bank also expects its provisioning to "completely cushion" against potential stressed loans, chief financial officer Rakesh Jha said.

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