Will tar­get 18% loan growth for the year

The Financial Express - - MONEY & MARKETS -

ICICI Bank on Fri­day re­ported a 24% se­quen­tial rise in bad loans in Q4 and pro­vi­sions of Rs 3,326 crore. In an in­ter­ac­tion with re­porters, the bank’s man­ag­ing di­rec­tor and CEO Chanda Kochhar said the bank has cre­ated re­serves of Rs 3,600 crore to act as buf­fer against vul­ner­a­bil­i­ties in five sec­tors – iron & steel, min­ing, power, rigs and ce­ment. Ex­cerpts... Why was it nec­es­sary to cre­ate the ad­di­tional re­serve of R3,600 crore?

I just want to re­it­er­ate that the Rs 3,600 crore of re­serves that we have cre­ated is an ad­di­tional re­serve and is a col­lec­tive con­tin­gency re­serve. This is, of course as I men­tioned that while all the banks are work­ing to­wards res­o­lu­tion for stress in cer­tain bor­row­ers and due to the global eco­nomic environment, the com­mod­ity cy­cle and so on there has been an im­pact on bor­row­ers in cer­tain sec­tors. These sec­tors are iron and steel, min­ing, power, rigs and ce­ment. In gen­eral to­wards our ex­po­sure in these sec­tors we have cre­ated these kinds of col­lec­tive re­serves. Which sec­tors will you fo­cus on for credit growth?

First of all when you look at the fu­ture, you should look at the fact that one is al­ready started see­ing growth op­por­tu­ni­ties in ar­eas around or­ders com­ing out of high­way and road projects and of rail­ways and de­fence and so on. We would first tar­get to con­tinue to grow do­mes­ti­cally aris­ing out of those op­por­tu­ni­ties. We will also con­tinue to ac­tu­ally keep our mo­men­tum on re­tail as­set growth. What is your credit growth?

We have achieved a ro­bust growth in our loan port­fo­lio where the re­tail port­fo­lio has grown by 23.3% and it now con­sti­tutes 46.6% of to­tal loans. Our over­all do­mes­tic loan growth was 16.4% for the year.

So for the year ahead, we would tar­get a loan growth of about 18% within which re­tail will grow by about 25%. On the do­mes­tic cor­po­rate side, the growth is ex­pected to be be­tween 5-7% given the fact that we want to fo­cus on lend­ing to higher rated cor­po­rates and re­duc­ing the con­cen­tra­tion risk to our port­fo­lio.

Now based on this, we ex­pect as far as credit qual­ity is con­cerned, we have ac­tu­ally been work­ing on res­o­lu­tion of cer­tain of these large cases, in fact trans­ac­tions which have been re­cently an­nounced by bor­row­ers along with other as­sets guid­ance on which are un­der dis­cus­sion will lead to delever­ag­ing of bor­row­ers and re­duc­tion in bank ex­po­sures. In fact they would lead to delever­ag­ing of bor­row­ers in the five sec­tors I men­tioned to you. But given the fact that some of these solutions take time and glob­ally the eco­nomic re­cov­ery is com­ing only grad­ual, we have thought it only pru­dent that we should keep cer­tain re­serves aside for ex­po­sures re­lated to these sec­tors. What was the ef­fect of AQR on your as­set qual­ity?

The ad­di­tions to­wards NPAs were Rs 6,500 crore in Q3 and this quar­ter it is about Rs 7,000 crore. It is as we had men­tioned that NPA ad­di­tions in Q4 would be more or less sim­i­lar to the ad­di­tions in Q3 and I am stat­ing that we have com­pleted RBI's as­set qual­ity re­view (AQR) ex­er­cise in line with the AQR ex­er­cise. As I said that this is also the re­sult of the AQR ex­er­cise and it has also been across sec­tors cer­tain part of it is also re­struc­tured as­sets which have now been re­clas­si­fied as NPAs. All of it is not re­ally new stressed as­sets. Rs 2,700 crore loans have slipped to the NPA cat­e­gory from re­struc­tured as­sets. How many 5/25 re­fi­nances were done in the quar­ter?

We did Rs 679 crore of 5/25 re­fi­nance and SDR worth Rs 1,200 crore, but that fi­nally gets in­cluded in the re­struc­tured and NPA num­bers and there­fore it is not over and above that. We sold ap­prox­i­mately Rs 700 crore of loans to as­set re­con­struc­tion com­pa­nies (ARCs). We plan to work to­wards res­o­lu­tion of ex­po­sures in the con­text of the chal­lenges fac­ing the cor­po­rate sec­tor, and to main­tain and en­hance the strength of our bal­ance sheet as well as our ro­bust cap­i­tal lev­els.

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