ICICI Bank reported an increase in bad loans in the January-March quarter, largely due to restructured assets turning bad. Managing director & chief executive officer Chanda Kochhar told reporters in a conference call she expects asset quality to improve from hereon. Excerpts:
What are your expectations on credit growth?
Our overall domestic growth has been 18%; the retail segment has grown at 25%. The corporate growth has been quite robust. On an annualised basis, corporate growth has been back to about 10%. We expect the credit growth to be 2-4% higher than the system in the near future. On that basis, we expect our domestic credit growth to be 18-20%.
Could you elaborate on the sectors that led to slippages this quarter?
The NPA addition during the quarter was Rs 3,260 crore, but out of that, slippages themselves were Rs 2,246 crore. Most of the addition to NPAs during the quarter was mainly on account of slippage of restructured assets, and not really due to new problem assets. These are not sector-specific, rather they are company-to-company issues. These are fewer companies, but our exposure is larger. FY15 was the peak as far as addition to NPAs from restructured assets is concerned. In the coming year, we expect it to be better in terms of additions and credit cost.
Can you give more colour on retail and corporate demand?
On the retail side, our focus has been on secured assets; so, mortgages and auto loans drive the growth. The growth in home loans has been over 26% and that in the auto loans more than 24%. We have seen some growth on personal loans and credit cards. As far as corporate credit is concerned, our growth has come from 2-3 things: Working capital requirement; some refinance opportunities of better-rated companies; and some amount of funding to public sector units. We expect corporate loan growth to improve this year.
How much was repatriated from overseas subsidiaries in FY15?
We repatriated, in terms of gains, about Rs 182 crore in the fourth quarter and about Rs 640 crore for the whole year. This is part of the other income. The rest, of course, is repatriation in capital, but that does not reflect in profits. This was $75 million in FY15 from the UK and $80 million from Canada.
What is your outlook on margins?
Net interest margin improved to 3.48% for FY15 and we will maintain it at this level in the next year.
Looking at the level of restructured assets before and now and the slippages, can you say that the exercise has worked?
Overall, of course, the restructuring exercise is useful because, in an economy where growth starts coming back, most of these assets start paying back. The issue is how fast the economy turns and is that in line with the assumptions made when the restructuring was done? In the first couple of years when the restructuring was done, certain amount of assumptions were made for the economy and the turnaround has been gradual. Some assets have not met these assumptions. But that does not mean these assets will not perform. About 25% of restructured assets are not able to perform and are getting downgraded, according to us.
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