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ICICI Bank makes Rs 37.80 billion provisioning

BS Banking Bureau

ICICI Bank has written down assets of ICICI worth Rs 37.80 billion, following the reverse merger of ICICI with the bank.

This means ICICI Bank has provided for Rs 37.80 billion in its balance sheet for 2002-03, making the largest ever provisioning by any Indian financial intermediary.

ICICI Bank has adopted the purchase method of accounting while merging the parent institution with itself. The method is based on the fair valuation of the loan portfolio of ICICI conducted by Deloitte, Haskins & Sells.

The writing down of the assets includes additional provisioning of Rs 19.53 billion. This will cushion any future impairment of ICICI's legacy assets.

The additional provisioning with regard to ICICI's non-performing assets is to the extent of Rs 9.02 billion.

This has increased the NPA coverage to 63 per cent and has also helped to bring down the NPAs from 5 per cent to 4.7 per cent for the merged entity.

K V Kamath, managing director and CEO of ICICI Bank, said: "We have cleaned our assets to a greater degree than what was expected by the market."

ICICI had made a provision of Rs 3.12 billion for the nine-month period ended December 31, 2001, while ICICI Bank had made a provision of Rs 1.17 billion for the same period.

For the year ended March 31, 2001, ICICI had gone in for accelerated provisioning of Rs 8.13 billion, apart from the normal provisioning of Rs 6.08 billion.

According to Kalpana Morparia of ICICI Bank, the bank is not envisaging any additional provisions in future on ICICI's assets other than the normal provisioning.

ICICI Bank will continue to sell down its assets.

"The sell-down in assets will reduce the concentration of risk and also help us have an optimal risk-return trade-off. We have the skills at originating the loans and we will look at churning our portfolio. The race is to build a healthy balance sheet, rather than just increasing its size," said Kamath.

ICICI Bank is planning to complete repayments of around Rs 200 billion next year.

"We have made repayments of around Rs 150 billion. The remaining Rs 50 billion can be raised as deposits," said Kamath.

The total balance-sheet size of the merged entity stands at Rs 1,041.10 billion, making it the second largest bank in India after the State Bank of India, and the largest private bank.

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