ICICI Bank asset quality worsens with impairment at INR45b

Higher slippages from restructured loans troubling.

It has been noted that in ICICI Bank, impairment was at INR45b or 5.5% of loans was higher than trend.

According to a research note from Maybank Kim Eng, more than 55% of slippages during the year were from loans restructured in earlier years.

Gross NPLs inched up from 3.0% last year to 3.8%. Higher slippages from restructured loans are a cause for concern as well, said the note.

Even though management guides for a better FY16, Maybank Kim Eng is wary of accounts restructured earlier as these exit their moratorium.

Core fee income growth of just 8% YoY was constrained by slower corporate loan growth. However, overall non-interest income grew 18% YoY on higher dividends from subsidiaries and repatriation income from overseas.

Also, retail loan growth continued, CASA ratio improved 250bps YoY to 45% and NIM expanded 20bps to 3.6%.

Here's more from Maybank Kim Eng:

Loan growth of 14.4% YoY was led by domestic lending growth of 17.8% YoY. Overseas book was muted, growing just 4.9% YoY.

Domestically, retail loans grew a strong 25% YoY. Corporate lending also picked up to 9.5% YoY. Retail loans to overall loans improved by 350bps YoY to 42.5%. We forecast loan growth of 15% YoY for FY16.

NIMs improved by 20bps YoY to 3.6%. An income tax refund of INR1b benefited NIM by 6-7bps. Excluding this, NIMs would have only improved marginally.

Fresh slippages amounted to INR33b. Some 70% of slippages during the quarter or INR22.5b were from a pool of restructured loans. Gross NPLs increased from 3.4% in 3QFY15 to 3.8% in 4QFY15. Net NPLs stood at 1.6% (3Q15: 1.3%).

Coverage ratio dropped 500bps QoQ to 59%. Fresh loans restructured in 4Q amounted to INR12.5b. Their current outstanding is INR110b or 2.8% of loans.