Sharp decline in ICICI's profit

By Our Special Correspondent

MUMBAI, MAY 3. The net profit of ICICI has dipped to Rs. 537 crores for the year 2000-01 compared to Rs. 1,206 crores in 1999- 2000. The financial institution has declared a dividend of 55 per cent (Rs. 5.50 per share of Rs. 10 each). In the fourth quarter the institution recorded a net loss of Rs. 257 crores compared to a net profit of Rs. 395 crores in the corresponding period in the previous year.

However, Mr. K.V. Kamath, Managing Director and CEO of ICICI said ``notwithstanding the environmental constraints, adding back the accelerated provisions and write-offs ICICI's ``profit to equity holders'' registered a growth of 21 per cent increasing to Rs. 1,332 crores in 2000-01 from Rs. 1,097 crores in the previous year. This growth was recorded despite a higher provisioning requirement of about Rs. 66 crores.'' This is consequent to the revision of the Reserve Bank of India (RBI) guidelines whereby sub-standard assets are to be classified as doubtful assets after 18 months of an asset being classified as non-performing loan (NPL) instead of 24 months.

ICICI has made aggregate provisions and write-offs of Rs. 1,421 crores in 2000-01 including Rs. 608 crores made as per the requirement of the Reserve Bank of India guidelines and the accelerated provisions and write-offs of Rs. 813 crores. Mr. Kamath said from the financial year 2000-01, ICICI has decided to make accelerated provisions against NPLs as more a conservative policy. ``As per this revised provisioning policy, ICICI would achieve a 50 per cent provision cover against a NPL in an accelerated time frame of three years, as compared to the five- and-a-half-year period prescribed under current guidelines,'' said Mr. Kamath. According to him, ICICI's policy is in line with the distinct trend amongst international banks and financial institutions in emerging markets towards increasing their provision cover against NPLs. ``This higher provision could provide additional cushion to the organisation in view of the rising impact of volatility in the global economy on emerging markets like India,'' he added.

Mr. Kamath said that ICICI continued its two-pronged strategy for reducing the NPLs, including continuous improvement in incremental asset quality and aggressive settlements and proactive solutions for existing NPLs and problem loans. He said that ICICI's strategy of making accelerated provisions and write- offs against NPLs resulted in sharp decline in ICICI's net NPL ratio to 5.2 per cent at March 31, 2001 from 7.6 per cent at March 31, 2000. The provision coverage against NPLs (provisions and write-offs as a percentage of gross NPLs) has increased to 50.2 per cent at March 31, 2001 from 34.2 per cent at March 31, 2000.

During the year ended March 31, 2001, ICICI' approvals increased 29 per cent to Rs. 56,092 crores compared to Rs. 43,523 crores in the previous year. During the same period, ICICI's disbursements increased 24 per cent to Rs. 31,965 crores compared to Rs. 25,836 crores in the previous year.

Mr. Kamath said that ICICI will reduce its stake in ICICI Bank to 40 per cent in the current financial year itself in line with the RBI's directive.

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