'We expect credit to make a very strong comeback in the second half'

ICICI Bank managing director & chief executive officer Chanda Kochhar spoke to Business Standard after announcing the bank's first-quarter results. Excerpts:

A year ago, you reported the first decline in profits since ICICI's reverse merger with ICICI Bank. This time, there is healthy growth. So, has the recovery started or have treasury operations helped you?

No, it is not treasury income that has helped us. There is indeed an upswing. The net interest margin should improve from this level and so should fee income. Credit growth in the sectors that we like should go up and provisions should decrease.

Can you give us a break-up of the provisions?

We do not give a break-up but last quarter the provisions were mainly related to retail and this quarter also they are mainly in line with those trends.

The increase is mainly on account of the corporate loans that have been restructured, which are Rs 1,500 crore (Rs 15 billion).

At the same time, we have upgraded a part of the portfolio, which is Rs 3,500 crore (Rs 35 billion). So, there is a net decrease of around Rs 2,000 crore (Rs 20 billion) in the portfolio.

A major element of your restructuring exercise was reworking the loan book. Are you on course?

Yes. Retail assets are now 47 per cent of the portfolio, as against 55 per cent at the end of the last quarter and corporate loans are around 40 per cent of the loan book. The other element of the plan was to lower the share of unsecured loans.

We have reduced it to around 7 per cent from 9 per cent of total advances in the first quarter of last year. The target is to lower it to 5 per cent and we should be able to do it by the end of the year.

With the economic environment also improving and the proportion of Casa (current account, savings account) in the deposit base improving, when should we expect you to step up lending?

We are already seeing an increase in housing loans and corporate finance, which includes working capital, project finance and infrastructure loans.

We expect credit to make a very strong comeback in the second half, led by housing and corporate loans. At the same time, we will allow unsecured loans to go off.

You had talked about raising the share of Casa to 32 to 33 per cent of the deposit base by the end of the year and you are already at 30.4 per cent. So, when do you expect to reach the target?

We should be there by the end of the year. You see, system-wide Casa is not increasing and every step that we take means that we are improving the market. I hope we can reach the target earlier but even if we achieve it by the end of the year, it is fine.

Is there a change in the share of overseas business to revenues and profits?

No, it is in line with what it was which was around 25 per cent.

Why is there a decline in the consolidated total income?

It is probably due to the business level. Business for some of the companies, such as life insurance, is linked to the market. In fact, insurance has seen a decline in business.

Now that the capital markets are looking up, have you revived the plans for initial public offers by ICICI Ventures and ICICI Prudential Life?

While the capital markets have improved, I do not think that they are at correct levels for new companies like ICICI Ventures and ICICI Prudential.

The understanding of the markets of this kind of companies should improve. We are not in a hurry. These companies are very well capitalised.