ICICI Bank spotlights increased spending on IT, cybersecurity

MUMBAI : ICICI Bank Ltd's improved performance in the March quarter was underscored by a metric that’s becoming crucial to the stability of lenders in the modern era, particularly in the context of the regulatory crackdown on Kotak Mahindra Bank Ltd.

Announcing its financials on Saturday, ICICI Bank highlighted that it had significantly increased its spending on information technology and cybersecurity, from 5.6% of aggregate operating expenses in 2019 to 9.4% in financial year 2023-24.

The spotlight turned on the increasing necessity for a robust information technology backbone in financial services when the Reserve Bank recently clamped down on Kotak Mahindra Bank for “serious deficiencies" in its IT system.

The regulator last week imposed business restrictions on the Uday Kotak-founded bank to “prevent any possible prolonged outage" that could “seriously impact not only the bank’s ability to render efficient customer service but also the financial ecosystem of digital banking and payment systems".

“IT resilience and customer security are of paramount importance to us and this is not constrained by any budget," Sandeep Batra, executive director at ICICI Bank, said after announcing the fourth-quarter results of India’s second-largest private lender.

“This is an ongoing effort and there could be instances of outages and errors in any bank. We have the ability to take quick recovery and corrective action and we will remain focussed on improving our capabilities," he added. “Whenever we need to spend money that has never been a constraint, we will remain focussed."

ICICI Bank’s operating expenses increased 19% year-on-year to ₹39,133 crore in FY24.

A recent glitch

Mint reported on 25 April about a glitch in the ICICI Bank mobile banking application that was flagged by users who said they could view the details of other people's credit cards.

“It has come to our notice that about 17,000 new credit cards which were issued in the past few days were erroneously mapped in our digital channels to the wrong users. They constitute about 0.1% of the bank’s credit card portfolio," an ICICI Bank spokesperson told Mint.

“As an immediate measure, we have blocked these cards and are issuing new ones to the customers. No instance of misuse of a card from this set has been reported to us… the bank will appropriately compensate a customer in case of any financial loss," the spokesperson said.

Also read: Kotak CEO calls for major tech infra upgrade in message to employees

Strong performance, mostly

On Saturday, ICICI Bank reported a standalone net profit of ₹10,708 crore for the March quarter, a growth of 17.4% year-on-year. Net interest income, the difference between interest earned and interest expended, improved 8.1% y-o-y to ₹19,093 crore.

However, net interest margin, a key measure of profitability for a lender, slid to 4.4% in the fourth quarter from 4.9% in the same period a year ago and 4.43% in the December quarter.

Analysts, though, are largely upbeat about ICICI Bank’s latest financial performance.

“While it was overall a strong quarter, a few areas that one could nitpick—while the absolute NIM remains higher than peers, the bank did see a marginal decline in NIM sequentially even as its peers saw a marginal increase despite their (quarter-on-quarter) deposit growth being on par or higher than ICICI," analysts at Sanford C. Bernstein said in a note to clients.

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