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ICICI Bank posts a record 76% drop in profits

ICICI Bank posts a record 76% drop in profits
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ICICI Bank, the country’s largest private sector lender, has reported a 76 per cent drop in net profit for the January-March quarter to Rs 702 crore, as it set aside additional contingency reserve of Rs 3,600 crore. This is its sharpest ever quarterly drop in net profit.

This additional reserve is a “prudent measure” to account for an increase in bad loans that could arise from exposure to the iron & steel, power, mining, rigs and cement sectors. Chanda Kochhar, managing director and chief executive officer, explained the contingency reserve was over and above the one mandated by the Reserve Bank of India.

In an investor presentation, the bank said its total exposure to these five sectors was Rs 44,000 crore at the end of March 31, 2016. It also stated that these sectors account for 4.8 per cent of its total exposure. Going forward, the management expects slippages from these five sectors and, hence, created the special reserve.

“The weak global economic environment, sharp downturn in the commodity cycle and gradual nature of the domestic economic recovery has adversely impacted borrowers in certain sectors like (those mentioned). While banks are working towards resolution of stress on certain borrowers in these sectors, it might take some time for solutions to be worked out, given the weak operating and recovery environment,” Kochhar said.

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