At a time when its peers such as HDFC Bank and Axis Bank have been able to maintain stable asset quality, ICICI Bank’s higher addition to bad loans is a dampener. HDFC Bank has the lowest loan delinquency with bad loans at 1.02 per cent of loans as of September. While Axis Bank has a higher gross non-performing asset (GNPA) at 1.34 per cent of loans, the bank has been able to keep it steady during the latest September quarter. ICICI Bank’s troubles with bad loans are bigger than that of its peers, with GNPA at 3.12 per cent of loans in the September quarter, up from 3.05 per cent in the June quarter.
Besides the bad loans, ICICI Bank has a larger restructured book too compared with its peers. The bank has been stepping up on its loans recasts over the last year. From about 2.2 per cent last September, ICICI Bank’s restructured book currently accounts for 3 per cent of its loans. Axis Bank’s restructured assets are 2.5 per cent of loans, while HDFC Bank has just 0.1 per cent of its loans recast.
Healthy retail trend
However, ICICI Bank continues to score well on the retail front; its 15 per cent loan growth was led by 25 per cent growth in retail loans. This compares well with the performance of its peers. Axis Bank and HDFC Bank grew retail loans 27 per cent and 17 per cent respectively in the September quarter. ICICI Bank’s strong retail performance augurs well for its profitability and growth. The bank has also been ramping up its low cost CASA (current account savings account) base over the last couple of years. The CASA ratio continues to remain healthy at 43.7 per cent as of September 2014. After achieving its first full-year net interest margin of 3 per cent in 2012-13, the bank has been able to scale it up further to 3.4 per cent in the September quarter.
Given that the overall bank credit slipped to five-year low levels of 9.7 per cent in September, the performance of the three large private banks has been healthy. For ICICI Bank in particular, easing of asset quality pressure over the next year or so will hold the key to the stock’s performance.
Source : The Hindu