ICICI Bank is even stronger than earlier but moratorium should bother

ICICI Bank’s moratorium level is at 17.5% which is still very high whereas the moratorium level for competitors like HDFC Bank and Axis Bank is in a single digit. The moneylender made ₹7,593 crore worth provisions for June quarter, which of ₹5,550 crores was precisely maintained for COVID-19 uncertainties.


ICICI Bank’s first-quarter performance demonstrated all the indications of the impact caused by the pandemic. The financier’s net gain missed the street evaluations, its fee revenue growth came under pressure, and the loan book contracted on a consecutive ground. 

The management’s review was as prudent as it could be. The moneylender ceased from offering any guidance in the forthcoming quarters.

But what may concern the investors primarily is a comparison with fellow members, ICICI Bank’s moratorium level is still at its peak at 17.5%. The loan book below moratorium now is significantly lower than the 30% as of April. On the contrary, the financier’s peers like HDFC Bank and Axis Bank have reported moratorium levels in a single digit.

The primary question is whether these moratorium levels indicate a severe bound in arrears once the duration terminates in August. The bank acknowledges that there are considerable risks ahead but has abstained from giving any more transparency.

The moneylender has kept aside ₹7,593 crore provisions throughout the quarter, of which ₹5,550 crore was specifically kept aside concerning  COVID-19 uncertainties. For the March quarter, the bank had reserved ₹2,725 crores towards pandemic related dangers. Evidently, the bank anticipates a substantial influence on asset quality forward of its gains to create a big buffer.

Analysts at Jefferies India Pvt Ltd indicated that a big moratorium regarding peers may not mean a rise in bad loans. “We believe ICICI’s higher moratoriums reflect higher levels in corporate loans (BB-below book is 2-3% of loans) and housing loans (22%) where more borrowers are seeking moratorium to preserve cash,” a note from the brokerage informed.

Over a phone call with analysts, ICICI Bank management has stated that 97% of its unguaranteed loan consumers have received salary credits. The bank considers that the moratorium levels ponder that the choice to preserve cash by consumers instead of stress. Although this is an argument presented by various banks, the level of provisioning displays that banks are not leaving anything to chance. Ergo, for ICICI Bank, a slippage ratio of sub-1% did not stop it from keeping aside a huge amount towards provisions. The financier has used the one-time profit of ₹3036 crores from stake sale in insurance subsidiaries hugely towards provisioning.

Similar to its peers, the second quarter would be a determining one for ICICI Bank. Meanwhile, financiers may not warm up to it or even in banks.

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