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ICICI Bank's losses on security receipts widen to Rs 408 cr in FY12

Somasroy Chakraborty/Mumbai 04 Jun 12 | 12:04 AM
Related to : ICICI Bank Ltd
 ICICI Bank Ltd

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ICICI Bank’s losses on its security receipts portfolio have nearly doubled to Rs 408 crore in the financial year 2011-12, from Rs 231 crore a year ago.

“This loss, primarily, comprised mark-to-market losses, based on the net asset value declared by asset reconstruction companies (ARCs) after taking into account the potential recovery estimates," the bank spokesperson told Business Standard in an e-mailed response.

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ARCs buy non-performing loans from banks by paying cash or offering security receipts. These loans are rated every year to assess their recovery potential. If the rating is downgraded, the bank holding the security receipt against that asset suffers a mark-to-market loss.

Industry analysts, however, feel the losses on the bank’s security receipts portfolio may have peaked as the country’s largest private sector lender has refrained from selling non-performing loans to ARCs in the past couple of years.

ICICI Bank has reduced its outstanding net investments in security receipts issued by ARCs to Rs 1,832 crore as of March 31 from Rs 2,831 crore a year ago. “The wind down of the portfolio will depend on collections from underlying assets. We expect provisioning required against this portfolio to be significantly lower, going forward, compared to that in FY11-12," the bank spokesperson said.

A part of this portfolio comprises mortgages and hence, will take time to mature. Industry analysts also agree the losses are likely to be limited on the bank’s security receipts portfolio this financial year.

“With no sale of non-performing assets over the past two years, we expect losses to come off substantially," banking analysts with Prabhudas Lilladher, a Mumbai-based broking company, said. Despite the losses on security receipts portfolio, the bank’s standalone net profit had expanded by 26 per cent to Rs 6,465 crore.

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