ICICI Bank transfers Rs 2,400 crore NPA to ARC

Pradeep Rane
07 May 2004

ICICI Bank managed to cut the NPA by transfering Rs2400 crore of gross NPAs to the ARC. The bank has transferred these loans at value of Rs 1200 crore. While the ARC has paid cash for these loans, the bank in turn has invested this cash as investments back inthe ARC.

Depending upon the value of the investments, ICICI Bank will be making further provisions/recovery on these loans, according Motilal Oswal Securities. The bank has also securitised assets worth Rs 10,700 crore in FY04.

According to the analsysts, "ICICI Bank has been able to show an impressive improvement on most of the operational parameters." The bank had recently completed its public issue mobilising Rs 3500 core, enabling the bank to tap the significant growth opportunities on the lending side.

The bank's net profits grew by 35% in the fourth quarter of '04, surpassing the market expectation. While the net interest income (NII) has shown a growth of 20%, trading gains have jumped significantly resulting in an operating profit growth of 107%.

Retail assets increase by 75%, trading gains were high and also the fee income, which surged by 65%. Accoring to Motital Oswal Securities, the possibility of rising interest rates and concerns of a reversal in commodity cycle are major risks for the earnings of the bank.

Mortgages have grown by 80% YoY and continue to be the largest component of the total retail assets. The high yielding commercial vehicles and auto loans have grown by 102%. The strong growth in retail book has enabled the bank to maintain the average yield on interest earning assets to 9% as compared to 10.2% in the previous year, though there has been a steeper decline in the lending rates due to severe competition and decline in the interest rates.