October 27, 2017 / 11:43 AM / a month ago

UPDATE 2-ICICI Bank's Q2 profit falls, awaits central bank report

* Net profit 20.58 bln rupees vs 24.91 bln rupees estimate

* Non-interest income falls on lower gains from unit stake sale

* Awaits RBI report on annual supervision (Adds CEO comments, further details on earnings)

By Devidutta Tripathy and Samantha Kareen Nair

MUMBAI, Oct 27 (Reuters) - ICICI Bank Ltd on Friday reported a bigger-than-expected 34 percent fall in second-quarter profit partly due to a smaller gain from the sale of a stake in a business, but bad loans remained stable.

The private sector bank is still waiting for the final report of the central bank’s annual supervision exercise, Chief Executive Chanda Kochhar told reporters on a conference call, adding they will disclose the findings of this audit in the third quarter.

As part of this review, the central bank looks to see if banks have correctly classified loans, taking into account repayment trends and other factors.

A record $145 billion soured loans due to an economic slowdown and, in some cases, profligate lending has stifled new bank credit in India. But private sector banks have been able to gain market share from their dominant state-run rivals which account for bulk of the troubled loans.

But some of ICICI’s private sector rivals have disclosed additional bad loans following a central bank audit of their books for the last financial year.

A $32 billion recapitalisation for the state-run banks announced this week also risks curtailing the private-sector banks’ competitive advantage and their higher valuations.

Kochhar reiterated that the bank expected total bad loan additions in the current financial year to March to be lower than last year. She forecast domestic loan growth in the financial year to be about 15 percent, led by as much 20 percent rise in retail loans.

ICICI, among the three domestic banks considered “too big to fail” by the country’s central bank, reported a net profit of 20.58 billion rupees ($316.51 million) in the quarter ended Sept. 30, missing analysts’ expectations of 24.91 billion rupees.

Non-interest income in the quarter included gains of 20.12 billion rupees from sale of stake in the initial public offering of unit ICICI Lombard General Insurance, ICICI said, lower than 56.82 billion rupees raked in from the stake sale in ICICI Prudential Life Insurance in the year ago quarter.

ICICI, which has the highest bad loans in absolute terms among private-sector lenders in the country, said its total provisions, including for loan losses, were 45.03 billion rupees in the September quarter, higher than 26.09 billion rupees three months ago, but 36 percent lower than a year ago.

Gross bad loans as a percentage of total loans stood at 7.87 percent at end-September, versus 7.99 percent at end-June and 6.12 percent a year ago. Net interest income and fee income rose by 9 percent each in the quarter.

State-run Canara Bank Ltd, the eighth-biggest bank by assets earlier on Friday reported a 27 percent fall in second-quarter profit. ($1 = 65.0225 Indian rupees) (Reporting by Devidutta Tripathy and Samantha Kareen Nair; Editing by Edmund Blair and Jane Merriman)

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