ICICI Bank Limited
(n Rs. Crore)
ICRA has assigned the rating of [ICRA]AAA(stable) to Rs. 15,000 crore Unsecured redeemable long term bonds of ICICI Bank Limited (IBL, or, the bank)1. ICRA also has rating outstanding of [ICRA]AAA (pronounced ICRA triple A) with a stable outlook on Rs. 23,050 crore of Lower Tier II Bonds Programme, Rs. 20,000 crore Unsecured redeemable long term bonds programme and Rs. 146 crore of long term bonds of IBL. ICRA also has the rating of [ICRA]AAA(stable) on the debts taken over by IBL from the erstwhile ICICI Limited and erstwhile The Bank of Rajasthan Limited (long term bonds of Rs. 1,371 crore and sub debt of Rs. 212 crore). Further, ICRA has rating outstanding of MAAA (pronounced M triple A) rating with stable outlook outstanding on the Term Deposit Programme and [ICRA]A1+ (pronounced ICRA A one plus) rating on Rs. 50,000 crore Certificates of Deposit Programme of IBL.
The highest credit quality ratings are supported by IBL’s strong position in the Indian financial system, strong operating performance, its sound capitalization levels (CRAR: 16.67%; Tier 1 Capital: 13.26%) as on September 30, 2016 and its extensive corporate relationships, besides its retail franchise. ICRA has taken note of the increase in slippages in H2FY2016 and H1FY2017. In light of the bank’s exposure to stressed sectors, the pace of fresh NPA generation as well as recoveries from the existing stock of Gross NPAs and standard restructured advances would be a key monitorable. Going forward, the ratings would be sensitive to the bank’s ability to improve its asset quality indicators.
The loan book of the bank stood at Rs. 435,264 crore as on March 31, 2016 as against Rs. 387,522 crore as on March 31, 2015, indicating a growth of ~12%. In H1FY2017, on YoY basis, the advances grew by further
10.9% to Rs. 454,256 crore. As at September 30, 2016, wholesale advances constituted 27.7% of the Bank’s
overall advances (28.8% as at March 31, 2015 and 27.5% as at March 31, 2016), retail advances constituted
47.9% (42.5% as at March 31, 2015 and 46.6% as at March 31, 2016), overseas advances constituted 20.1% (24.3% as at March 31, 2015 and 21.6% as at March 31, 2016) and the SME advances accounted for 4.3% (4.4% as at March 31, 2015 and 4.3% as at March 31, 2016).
Headline asset quality of the Bank has deteriorated on account of increase in reported slippages in H2FY2016 and H1FY2017. Consequently, there was an increase in Gross NPAs to 6.82% and Net NPAs to 3.57% as at September 30, 2016 as compared to 3.78% and 1.61% as at March 31, 2015 and 5.82% and 2.98% as at March 31, 2016. The fresh NPA generation rate has remained high during the current year with annualised fresh NPA generation of 7.94% and 7.39% during Q1 and Q2FY2017 and with net restructured book of Rs
6,336 crore (~1.4% of net advances) as on September 30, 2016 (Rs 8573 crore (2% of net advances) in March
2016), the NPA generation rate is expected to remain high in the current year. Due to fresh NPA generation, provisioning cover (excluding prudential/ technical write-offs) has declined to 50% as at September 30, 2016 as compared to 59% as at March 31, 2015 and 51% as at March 31, 2016. Consequently Net NPA as a % of net worth stands higher at 17.3% as at September 30, 2016 as compared to 7.9% as at March 31, 2015 and 14.8% as at March 31, 2016. In ICRA’s view, while retail advances asset quality has held up well, the same for the wholesale book shall remain a key monitorable.
CASA stood at ~46% as at September 30, 2016 and remains stable as compared ~45% in March 31, 2015 and
~46% in March 31, 2016. CASA ratio remains one of the highest amongst peer group and a significant credit positive in light of more granularity of depositor base as well as lowering the cost of borrowings. As at September 30, 2016, the bank had 4,468 branches and 14,295 ATMs.
Despite a decline in yield on advances, lower cost of funds resulted in a marginal improvement in Net Interest Margins from ~3.07% in FY2015 to 3.11% during FY2016. Historically, fee income (transaction based income and forex income) has been a strong source of income for the Bank at ~1.45% of average assets. However, in FY2016, fee income growth was muted at ~8%% YoY as against ~11 in FY2015. This was offset by the gains in treasury income primarily driven by stake sale in the insurance subsidiaries in FY2016. While corporate fee
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