ICICI Bank restructured assets down by 25% to Rs 78 billion

Mumbai: ICICI Bank has managed to make a marked improvement in asset quality, with the amount of restructured assets declining by 25 per cent to Rs 78.56 billion in the end of the second quarter. The bank expects to make further improvement in the quantum of restructured loans during the second quarter of this financial year.

The bank has also lowered its lending exposure (share in total assets) to sectors with comparatively higher levels of non-performing assets, like power, steel and textiles, at the same time increasing exposure to growth sectors like telecom. The share of power, steel and textiles has declined from 24.6 per cent as of end-March 2003 to 21 per cent as of end-September 2003.

The revival in economy has aided upgrade of assets from the restructured category into standard assets, says HSBC Securities. The net non-performing loans ratio has also declined to 4.8 per cent as compared to 4.9 per cent as at end of Q1. A strong growth in economic activity led by traditional sectors of metals and machinery equipment has improved the asset quality.

Also, the share of retail assets in total assets has increased to 39 per cent in Q2 with total retail assets at Rs 252 billion as compared to Rs 225 billion in Q1 and Rs 191 billion as at end-March 2003. The yield on retail assets remains above 10 per cent and with the incremental cost of deposits at 4.3 per cent, these assets provide a good spread.

Housing accounts for close to half of retail assets, followed by automobile finance at little over 20 per cent. "The switch to retail assets while keeping the total customer assets at more or less at the same level has also aided growth in net interest income by 47 per cent in Q2 and 35 per cent in the first half of FY 2004," says HSBC Securities.

The bank continues to replace the high cost liabilities of erstwhile ICICI with deposits, and repaid another Rs 19.5 billion of these liabilities during Q2. It expects to repay another Rs 70 billion in the second half of FY 2004. Deposits grew by Rs 30 billion in Q2 compared to Rs 56.8 billion in Q1. The average cost of deposits during Q2 declined to 5.6 per cent from 6 per cent in Q1.