ICICI Bank sells 1.5% in life arm for ~840 cr

Private sector lender ICICI Bank on Monday sold 1.5 per cent stake in its life insurance arm ICICI Prudential for ~840 crore.

This is the second such transaction by the bank in a week to strengthen its balance sheet in the wake of the Covid-19 pandemic that is expected to worsen the bad loans problem of banks.

Last week, the private lender sold 3.96 per cent in its general insurance arm ICICI Lombard for ~2,250 crore. With this, the bank has so far raised ~3,090 crore by selling stakes in life and general insurance subsidiaries.

In a statement to the exchanges, the bank said, pursuant to the approval granted by the board of the bank, it divested 21.5 million shares of face val

STOCK RISES ue of ~10 each of

ICICI Lombard

Prudential Life

Insurance, representing 1.5 per cent of its equity share capital on the stock exchange for an approximate total consideration of ~840 crore.

After the transaction, the ICICI Bank’s stake in its life insurance subsidiary stood at 51.4 per cent and the rest is publicly held. While shares of ICICI Bank on Monday closed 1.07 per cent higher at ~367.80, from its previous close on the BSE, that of ICICI Prudential ended at ~406.80, up 3.85 per cent from previous day’s close.

The private lender had a capital adequacy ratio of 16.11 per cent at the end of March, which is well above the regulatory requirements. But the bank had indicated that due to the uncertainties arising out of the pandemic, it would further strengthen its balance sheet.

For bad loans and Covid-related disruptions, the bank made provisions of ~5,967 crore, up 9 per cent from ~5,451 crore in Q4FY19. Compared to the previous quarter’s figure of ~2,083 crore, provisions were up almost 186 per cent.

Analysts have said several banks have been monetising part of stake in subsidiaries and some strategic holding to enhance capacity to absorb shocks from the economic disruption caused by the pandemic. Banks will face heightened stress due to bad loans. On the base case scenario, ratings agency ICRA sees gross NPAS rising to 11.3-11.6 per cent by March 2021.

The stress emerging from severe economic shock caused by steps to contain the pandemic may drive total slippages of up to ~5.5 trillion in the country in FY21.

The corporates side may see slippages of ~3.4 trillion and non-corporates — retail, farming, and MSME — may account for about ~2.1 trillion stressed loans, according to India Ratings.