Can ICICI Bank turn around a decade of underperformance? | Techno Glob

Almost all banks have reported better financial results and ICICI Bank may be poised to steal from its rivals at a time when lending rates are on the rise. Unless a new wave of pandemics or poor government policymaking slows the economic recovery, ICICI Bank will continue its three-year turnaround story, reversing its operating and stock underperformance over the past 10 years.

Credit for the turnaround goes to ICICI Ltd; ICICI Lombard General Insurance; Rightfully so to CEO Sandeep Bakhshi, who has been with the team through stints at ICICI Bank and ICICI Prudential Life Insurance. The low-key Bakhshi was brought in as CEO in October 2018 as part of a management overhaul after the bank’s former CEO was ousted over corporate governance issues.

Bakhshi steered the bank from that controversial phase and refined its business strategies. Payoff can be seen: In the December quarter of FY22, ICICI Bank reported its lifetime best net profit. 6,194 crore and 1.9% of the assets (RoA). Its net NPA ratio fell from 0.99% on 30 September 2021 to 0.85% on 31 December 2021, the lowest since 31 March 2014. NPAs have also come down significantly. The focus is on keeping the cost of debt below 25% of operating profit (PPOP).

ICICI Bank is currently in news for maximum exposure of Rs. 7,089 crore in the ABG shipyards case, the State Bank of India (SBI) has alleged that part of the loans given to the company, among India’s largest and most profitable shipbuilders, were diverted to buy properties from its promoters’ related entities, which are facing bankruptcy. Investigating authorities are in the process of questioning Rishi K. Agarwal, chairman and MD of ABG Shipyards, for defrauding a consortium of 23 banks of Rs. 22,842 crore—India’s biggest bank fraud till date. However, the loans turned into non-performing status years ago and ICICI Bank’s exposure was added to its books.

What is Bakhshi’s secret sauce? followed by market leader HDFC Bank; ICICI Bank under Bakhshi has increased manpower for credit assessment with intelligence gathered at the regional branch level in the case of loans to small enterprises. domestic lenders;

The bank also now evaluates performance differently. We have stopped tracking performance for selling specific products such as opening savings accounts and selling mutual funds and insurance policies. The bank has turned agnostic on loans to retail borrowers or small businesses etc. and no longer targets branches. Depending on the geographical location of the branches and market conditions, the freedom to choose the product mix to sell is delegated to the local managers. The bank is now focusing on PPOP growth, a measure that has outperformed its larger private sector counterparts.

ICICI Bank is now at the bottom on almost all measures of accountability and aims to increase this advantage over competitors, according to BofA Securities. It also noted that the lender’s large retail portfolio is no longer a deficiency and in fact provides scope for further growth over the next decade.

Then, Can Bakhshi lead ICICI Bank to reverse a decade of underperformance?

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