"We have written off around Rs 7,000 crore of loans during the quarter. For the year, the write-offs are about Rs 11,000 crore. Last year, the write-offs were about Rs 8,300 crore."
Much of the addition to ICICI Bank’s gross non-performing assets (NPAs) in Q4FY19 came from a single large exposure to a sugar company, which along with other accounts from the above BB-rated portfolio, accounted for Rs 850 crore, Rakesh Jha, the bank’s chief financial officer (CFO) told reporters. ‘BB’ and below-rated accounts now make up about 3% of the loan book, he added. Edited excerpts:
How much of the Rs 3,547-crore slippage has come from the sugar account? Are there any other chunky slippages? Also, could you share a specific number for credit costs expected in the coming year?
We normally don’t share details of individual accounts and that is why we have not disclosed the exposure to this sugar company. Otherwise, additions we have seen in the quarter on the retail front have been absolutely normal and bulk of the additions in corporate and small and medium enterprises (SME) have come from the ‘BB’ and below-rated portfolio. Other than that, there is this sugar account.
On the credit cost, going forward, we expect a significant decline from the trend that we have seen in FY19. It’s difficult to give a particular number per se, but it will be a significant decline. You have already seen that the NPA additions have come off substantially in FY19 itself. There will be a decline and we will get to a normalised trend in credit costs.
How many of the accounts that slipped were from the watchlist and the restructured book?
Outside the ‘BB’ and below portfolio, from the corporate and SME side, the slippage was about Rs 850 crore and that was largely this one sugar account.
What is the reason for such a high write-off during this quarter? Will you be continuing this mode to reduce NPA stress going ahead? Also, how much of the ‘BB’ and below-rated book is likely to slip in the next few quarters?
We have written off around Rs 7,000 crore of loans during the quarter. For the year, the write-offs are about Rs 11,000 crore. Last year, the write-offs were about Rs 8,300 crore. So if you look at it on a year-on-year basis, there’s not much difference there. The write-offs are all of fully-provided cases. So as such they won’t have any impact from a P&L (profit and loss) perspective. It brings down the gross NPA ratio and also the provision coverage ratio because of the reduction from the provision levels. The portfolio of ‘BB’ and below-rated accounts has come down to Rs 17,500 crore. Our total loan portfolio is close to touching Rs 6 lakh crore. So it’s about 3% of our total loan portfolio.
Of the gross slippages, how much has been from the ‘BB’ and below book this quarter?
Of the total slippages which have happened, corporate and SMEs are about Rs 2,700 crore, out of which Rs 850 crore is outside of ‘BB’ and below, which is largely the sugar account. The balance — about Rs 1,900 crore — would have been the ‘BB’ and below accounts.
Your net interest margin (NIM) is the highest in many quarters. What has boosted that?
If you look at the last couple of years, our funding profile has been improving. Even in the last financial year, as the funding costs have gone up, we have been able to raise deposits and not relied on higher-cost funding options. Plus, the increase that we have seen on the funding cost, we have been able to pass it on to the lending side. That has meant that we have been able to improve our margins through the year. For Q4, the margin is 3.72%. That does include the benefit of Rs 400 crore of interest that we have got on income tax refund.
Do you expect to sustain margins at these levels over the next year?
The 3.42% that we have for the full year, going forward, we will definitely strive to maintain and maybe marginally improve from that level.