Description
ICICI bank, its organization structure, its shareholding pattern, operating ratios, Du pont analysis, cashflow analysis, valuation ratios. capital adequacy ratio, cash reserve ratio and NPAs.
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OVERVIEW
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ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its whollyowned subsidiary. India's second-largest bank with total assets of Rs. 3,446.58 billion. Most valuable capitalization. bank in India in terms of market
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Ranked third amongst all the companies listed on the Indian stock exchanges in terms of free float market capitalization. Bank has a network of about 950 branches and 3,300 ATMs in India and presence in 17 countries
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SHAREHOLDING PATTERN
ORGANISATION STRUCTURE
RETAIL BANKING
Key statistics as on 31 March 2007 Total retail disbursements Total retail portfolio Retail customer accounts Branches and extension counters ATM network 777 billions 1,277.03 billion 25 million 755 3,271
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Cross-selling new products
The products of life and general insurance subsidiaries to their existing customers is a key focus area for the Bank.
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In fiscal 2007, about 18% of ICICI Prudential Life Insurance Company’s new business was generated through ICICI Bank.
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CORPORATE BANKING
They offer a complete range of corporate banking products including – Rupee and foreign currency debt l Working capital credit l Structured financing l Syndication and transaction l Banking products and services
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Corporate Banking Group
Global Clients Group
Major Clients Group
INTERNATIONAL BANKING
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Strong franchise among non-resident Indians. Technology-enabled access for overseas customers, wide distribution network in India and alliances with local banks in various markets. Over 450,000 NRI customers. Market share in inward remittances into India has increased to over 25% . Holistic product suite across the entire risk spectrum starting from deposits and bonds to the more complex structured derivative products, private equity and real estate.
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BALANCE SHEET
Particulars (Y.E. Mar 31) (Rs. FY 07 FY 06 FY 05 in cr.) Equity Share Capital 899 890 737 Preference Share Capital 350 350 350 Reserves and Surplus 23,414 21,316 11,813 Net Worth 24,663 22,556 12,900 Deposits 230,510 165,083 99,819 Borrowings 51,256 38,522 33,545 Other liabilities & provisions 38,229 25,228 21,396 Total Liabilities 344,658 251,389 167,659 Cash and Bank 37,121 17,040 12,930 Investments 91,258 71,547 50,487 Advances 195,866 146,163 91,405 Fixed Assets 3,923 3,981 4,038 Others 16,490 12,658 8,799 Total Assets 344,658 251,389 167,659
GROWTH RATE
Particulars (Y.E. Mar 31) Equity Share Capital Preference Share Capital Reserves and Surplus Net Worth Deposits Borrowings Other liabilities & provisions Total Liabilities Cash and Bank Investments Advances Fixed Assets Others Total Assets
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FY 07 1.07% 0.00% 9.84% 9.34% 39.63% 33.06% 51.53% 37.10% 117.85% 27.55% 34.00% -1.44% 30.28% 37.10%
FY 06 20.77% 0.00% 80.44% 74.85% 65.38% 14.84% 17.91% 49.94% 31.79% 41.71% 59.91% -1.42% 43.85% 49.94%
In FY 06, Net Worth increased mainly due to increase in Share Premium by Rs. 7,915 cr. In FY 07, balances with RBI increased by 116% and balances with deposit accounts outside India by 138%.
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200% 190% 180% 170% 160% 150% 140% 130% 120% 110% 100%
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ADVANCES
Unsecured to Total Advances
12 10 8 6 4 2 0
Growth of cash credits, overdrafts and loans repayable on demand has reduced from 102.1% in FY 06 to 31.8% in FY 07. Growth of term loans has reduced from 54.7% in FY 06 to 35.3% in FY 07 even though its contribution to total advances has increased from 76.5% in FY 06 to 77.2% in FY 07. Growth of unsecured loans has reduced from 98% in FY 06 to 58.6% in FY 07 even though its contribution to total advances has increased from 17% in FY 06 to 20.2% in FY 07. This has increased resulting in risk of higher NPA. Growth of syndicated loans has increased from 149.1% in FY 06 to 393.5% in FY 07 and also its contribution to total advances has increased from 2% in FY 06 to 7.5% in FY 07. This shows that ICICI Bank is diversifying its risk.
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INVESTMENTS
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Investments in Govt. Securities (both inside and outside India have constantly increased YoY from 68.2% in FY 05 to 73.8% in FY 07. Investments in subsidiaries and/or joint ventures have grown by 103% from Rs. 1,284.8 cr in FY 05 to Rs. 2,607 cr in FY 07. Provision to Total Gross Investment rate has declined from 1.34% in FY 05 to 0.61% in FY 07 showing that the quality of investments have improved over the years. Rate of Provision on Indian Investments is more than rate of provision on outside India investments implying that investments outside India is relatively safer.
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BORROWINGS
Borrowings are increasing consistently YoY from FY 05 (14.8%) to FY 07 (33.1%) due to following reasons: Borrowings outside India by way of Bonds and Notes have increased significantly by 162.2% in FY 07.
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Borrowings outside India from International Banks, Institutions and Consortiums have also increased by 43.1% in FY 07.
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So, in this way ICICI Bank is increasing its exposure in foreign countries.
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PROFIT & LOSS ACCOUNT
Particulars (Y.E. Mar 31) (Rs. in FY 07 FY 06 cr.) Net Interest Income 6,635.79 4,708.6 8 Other Income 5,929.17 4,180.8 9 Net Income 12,564.96 8,889.5 7 Operating Expenses 6,690.56 5,001.1 5 Pre Provision Profit 5,874.40 3,888.4 2 Provisions except tax 2,226.37 791.81 Profit Before Tax 3,648.04 3,096.6 0 Income Tax 537.82 556.53 Tax Rate 14.74% 17.97% Profit After Tax 3,110.22 2,540.0 7 FY 05 2,839.0 0 3,416.1 4 6,255.1 4 3,299.1 5 2,955.9 9 428.80 2,527.2 0 522.00 20.66% 2,005.2 0
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GROWTH RATE
Particulars (Y.E. Mar 31) Net Interest Income Other Income Net Income Operating Expenses Pre Provision Profit Provisions Profit Before Tax Income Tax Tax Rate Profit After Tax
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FY 07 40.93% 41.82% 41.34% 33.78% 51.07% 181.18% 17.81% -3.36% -17.97% 22.45%
FY 06 65.86% 22.39% 42.12% 51.59% 31.54% 84.66% 22.53% 6.62% -12.99% 26.67%
Pre Provision Profit increased by 51% in FY 07 as compared to 32% in FY 06 due to reduction in growth of operating expenses to 34% in FY 07 as compared to 52% in FY 06. Provisions increased significantly during fiscal 2007 because of higher provisions created on standard assets and lower level of write-backs.
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OPERATING EXPENSES
OPERATING EXPENSES % 2007 (Cr) 2006 (Cr) INCREASE % OF TOTAL (2007)
Payments to and provisions for employees
1,616.7
1,082.3
49.38%
24.16%
Rent, taxes and lighting
310.8
234.8
32.37%
4.65%
Printing and stationery
152.5
111.0
37.30%
2.28%
Advertisement and publicity Depreciation on Bank’s property (including non– banking assets) Depreciation (including lease equalisation) on leased assets Directors’ fees, allowances and expenses Auditors’ fees and expenses Law charges
217.7
185.6
17.35%
3.25%
356.5
347.2
2.69%
5.33%
188.3 0.4 2.1 28.5
276.6 0.3 1.8 11.2
-31.94% 18.91% 14.88% 153.48%
2.81% 0.01% 0.03% 0.43%
OPERATING RATIOS
Particulars (Y.E. Mar 31) Yield on Advances Yield on Investments Net Interest Margins Average Yield Cost of Funds Cost of Deposit Cost of Borrowng Spread Cost - Income Tax Rate FY 07 9.41% 7.36% 2.63% 8.92% 6.58% 5.89% 7.60% 2.34% FY 06 8.59% 6.05% 2.62% 8.31% 5.79% 4.41% 7.87% 2.53%
53.25% 56.26% 14.74% 17.97%
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RoA DECOMPOSITION
Particulars (Y.E. Mar 31) NII/Assets Commission & Brokerage/Assets Investment Profit/Assets Other Income/ Asset Net Revenues/Assets Operating Expn/Assets Provisions/Assets Taxes/Assets Total Costs/Assets RoA Average Equity/Assets RoE FY 07 2.23% 1.45% 0.03% 0.51% 4.22% -2.24% -0.75% -0.18% -3.17% 1.04% 0.078 13.37% FY 06 2.25% 1.43% -0.05% 0.61% 4.24% -2.39% -0.38% -0.27% -3.03% 1.21% 0.083 14.62%
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DU PONT ANALYSIS
ICICI Bank 52.95% 46.75% 4.22% 12.81 13.37% HDFC Bank 40.69% 53.68% 6.34% 14.04 19.46% Axis Bank 48.37% 52.87% 4.19% 19.63 21.04% SBI 45.41% 45.82% 4.12% 17.99 15.41%
FY 2007 PAT/ PPP PPP/Net Income Net Income/ Assets Assets / Equity ROE
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ROE & ROCE
Particulars (Rs. in bn) PAT PREF DIV NETWORTH ROE FY 2007 31.1022 0.000035 232.59625 13.37% FY 2006 25.4007 0.000035 173.77985 14.62% Particulars (Rs. in bn) PAT INT ON LT DEB CAP EMP ROCE FY 2007 31.1022 34.11 784.695834 8.31% FY 2006 25.4 28.35 534.81011 3 10.05%
CASH FLOW ANALYSIS
There was an increase in Cash Flow from Operations of 396% whereas Net Profit only increased by 17.8% in FY 07 mainly due to following reasons: Increase in Provisions by 171.7% which is a non-cash expenditure. lDecrease in Investments and Advances Growth by 86.1% and 12.9% respectively. lIncrease in Other Liabilities and Provisions by 94%.
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There was a decrease in Cash Flow from Investing activities in FY 07 by 133% mainly due to increase in purchase of Held To Maturity securities by 147.9%. There was an increase in Cash Flow from Financing activities in FY 07 by 110% mainly due to increase in net proceeds of bond (incl. subordinate debt) by 18,381.9%.
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VALUATION RATIOS
Particulars (Y.E. Mar 31) EPS (Diluted) (Rs) EPS Growth (%) Book Value (Rs) P/E Ratio (x) (TTM) P/BV (x) (TTM) Dividend Yield (%) (TTM) Particulars (FY 2007) EPS (Diluted) (Rs) EPS Growth (%) Book Value (Rs) P/E Ratio (x) (TTM) P/BV (x) (TTM) FY 07 34.64 7.74% 270.34 33.64 3.58 1.05% FY 06 32.15 17.64% 249.55 21.54 2.36 0.90% FY 05 27.33 3.37% 170.34 15.12 2.31 0.90%
ICICI Bank 34.64 7.74% 270.34 33.64 3.58
Axis Bank HDFC Bank 22.79 33.43% 120.49 34.09 3.46 36.06 36.95% 201.42 38.27 4.94
SBI 86.29 3.06% 594.69 15.53 2.56
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BUSINESS SEGMENT REPORTING
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Consumer and Commercial Banking segment:
PBT was Rs. 23.38 billion in fiscal 2007 as compared to Rs. 26.55 billion in fiscal 2006 primarily due to an increase in provisions and contingencies and increase in non-interest expense. Ø Net interest income, increased by 32.3% to Rs. 56.53 billion in fiscal 2007 from Rs. 42.73 billion in fiscal 2006, primarily due to an increase in the interest income on advances, offset, in part, by an increase in the interest expense on deposits. Ø General provision on standard assets increased by 115.6% to Rs. 7.31 billion in fiscal 2007 from Rs. 3.39 billion in fiscal 2006.
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Investment Banking segment:
Ø Profit before tax of investment banking segment increased
to Rs. 13.48 billion in fiscal 2007 from Rs. 4.80 billion in fiscal 2006 primarily due to increase in non-interest income and net interest income.
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BUSINESS SEGMENT REPORTING
Particulars Revenue contribution to Total Operating profit to Total PBT contribution to Total PBT Asset Utilsed to Total Asset Segment liability to Total Liability Provisions to Total Provision Revenue Growth Operating Profit Growth PBT Growth Provisions Increase Segment Assets Utilisation Ratio 31.03.07 76.87% 76.70% 64.10% 63.59% 76.66% 98.67% 52.38% 33.90% -11.93% 200.11% 10.85%
Consumer and Commercial Banking 31.03.06 78.70% 86.25% 85.74% 66.20% 76.50% 92.45% 39.87% 71.40% 40.13% 9.37%
Investment Banking 31.03.07 23.13% 23.30% 36.95% 36.41% 23.34% 1.33% 69.44% 155.21% 180.86% -50.67% 5.70% 31.03.06 21.30% 13.75% 15.50% 33.80% 23.50% 7.55% 60.79% 31.79% -28.46% 4.97%
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GEOGRAPHICAL SEGMENT REPORTING
Particulars (Rs. in crores) Revenue Assets Revenue to Total Revenue Assets to Total Assets Revenue Growth Domestic Operations 31.03.07 26,896.2 303,967.0 92.99% 88.19% 46.69% 31.03.06 18,334.8 2,29,574.5 95.05% 91.32% Foreign Operations 31.03.07 31.03.06 2,027.3 40,691.1 7.01% 11.81% 112.40% 954.5 21,814.5 4.95% 8.68%
Note: In 2005, no separate disclosure was provided because business was largely concentrated in India.
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Asset Utilisation Ratio of Foreign Operations is very low compared to Domestic Operations. ICICI Bank is expanding its operations abroad as seen by increase in its revenues from foreign operations.
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HIGHEST EXPOSURE IN INDUSTRY
With its recent fundraising, ICICI Bank now has the highest net-worth among all Indian banks and has thus augmented its ability to take on big-ticket exposure required for large projects (banks are not allowed to lend > 15% of their networth to a single project).
Name of Bank ICICI Bank SBI HDFC Bank PNB Axis Bank Net worth (Rs bn) 472 355 130 121 82 Max exposure (Rs bn) 70.80 53.25 19.50 18.15 12.30
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SANGLI BANK ACQUISITION
In Dec-06, ICICI Bank acquired Sangli Bank, a Maharashtrabased old private sector bank, with an asset base of Rs. 21bn. Sangli bank had about 190 branches of which 80% were in the state of Maharashtra and had a strong presence in rural credit. Apart from helping ICICI Bank ramp up its liability base, the network could also aid it in its rural initiative by: lProviding it with the skill set (in form of former Sangli Bank’s employees) to tap into some of the rural markets and
lProviding
a strong presence in the rural and semi urban areas allowing it to tap into that market more effectively.
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CAPITAL ADEQUACY RATIO
2006-2007 Capital Adequacy Ratio (%) Tier I Capital (%) Tier II Capital (%)
HDFC Bank 13.08 8.57 4.51
Axis Bank
SBI
ICICI 11.69 7.42 4.27
11.57 12.34 6.42 5.15 8.01 4.33
CASH RESERVE RATIO (CRR)
In view of rising inflation, RBI has increased CRR from 5% to 6.5% during the fiscal 2007 (At present its at 7%) .
Particulars (Y.E. Mar 31) Investments Advances FY 07 (Cr) FY 06 (Cr) FY 05 (Cr) 91,257.84 71,547.39 50,487.35 195,865.6 146,163.1 91,405.15 Growth Rate Particulars (Y.E. Mar 31) Investments Advances FY 07 FY 06 41.71% 59.91%
27.55% 34.00%
Because of it increase in investments and advances is less in 2007 as compared to last year.
IMPACT OF HIKE IN CRR
The 150 bps hike in Cash Reserve Ratio done by RBI has forced banks to raise lending rates for mortgage loans. However housing finance companies are not impacted by hike in CRR requirements and have not raised rates as much as banks. As a result, ICICI bank has lost market share to its main competitor HDFC.
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DEFERRED TAX
Liability Value FY 2007 Depreciation on fixed assets 654.33 Provision for bad and doubtful debts Others Tax related to foreign branches Total 654.33 Total FY 2006 1175.85 88.4 0.04 1264.2 9 650.15 95 88.07 0.78 834 699.08 is 91.72 charged 790.8 during the Assets Value
Depreciation on fixed assets 669.72 Provision for doubtful debts Capital loss Others Tax related to foreign branches Total 669.72 Total FY 2005 Depreciation on fixed assets 753.77 Provision for doubtful debts Depreciation on fixed assets Others it means more depn Others 22.16 is DTL, Total in P/L (tax) than in P/L 775.93 Total a lot of FA is purchased (books) i.e.
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year.
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DTL has increased in FY 07 because of PBDD which has almost doubled.
NPA
Particulars Gross NPA Net NPA Net Customer Assets Gross NPA Ratio (%) Net NPA Ratio (%) Coverage Ratio 2007 41.68 20.19 2006 22.73 10.75 2005 34.37 19.83 978.94 3.51% 2.03% 2,053.74 1,520.07 2.03% 0.98% 58.37% 1.50% 0.71% 63.72%
2007 Industry Amount Retail finance Chemicals & fertilizers Food & beverages Textiles Iron/steel & products Electronics & engineering Services – non finance Services – finance Paper and paper products 31.14 1.64 1.25 0.84 0.77 0.63 0.63 0.19 0.07 0.06 0.01 4.96 42.19 (0.51) 41.68 % 73.8 3.9 3.0 2.0 1.8 1.5 1.5 0.5 0.2 0.1 11.7 100.0
2006
Amount 14.29 1.65 0.67 1.68 0.21 0.55 0.98 0.13 0.07 0.03 0.01 2.68 22.95 (0.22) 22.73
% 62.3 7.2 2.9 7.3 0.9 2.4 4.3 0.6 0.3 0.1 11.7 100.0
Comparison of NPAs (FY 2007) Particulars Gross NPA Ratio (%) Net NPA Ratio (%) ICICI Bank 2.03% 0.98% Axis Bank 1.13% 0.61% HDFC Bank 1.40% 0.43% SBI 2.92%
Automobile (including trucks) Metal & metal products Power Cement Road, port, telecom, urban 1.56% Development & other infrastructure Other Industries Total Interest suspense Gross NPAs
DERIVATIVES
Balance Sheet Management
Market Making
Derivative Products
Risk monitoring of the derivatives portfolio other than credit derivatives is done on a daily basis. • Credit derivative – monthly basis. • Makes provisions on the outstanding positions in trading derivatives for possible adverse movements in the underlying.
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Marked to Market and resulting gain/loss transferred to P/L
Lead to huge amount of contingent liability
KEY DOMESTIC SUBSIDIARIES
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share of 30%. In seven years of operation, IPLI has built the largest distribution network (among private players) of about 680 branches and an agency force of more than 235,000.
ICICI Prudential Life Insurance Company: Largest private sector insurance player in India with a market
Source: Markets
CLSA
Asia-Pacific
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KEY DOMESTIC SUBSIDIARIES
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ICICI Lombard General Insurance Company:
A joint venture (74:26) between ICICI Bank and Fairfax Holdings of Canada. It is the largest private sector general insurance company with a market share of about 34% among private players.
Source: Markets
CLSA
Asia-Pacific
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KEY DOMESTIC SUBSIDIARIES
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ICICI Prudential Asset Management Company:
ICICI Prudential Asset Management Company (ICICI AMC) was the second largest mutual fund in India at April 30, 2007 with assets under management of over Rs. 420.00 billion. Prudential ICICI AMC achieved a profit after tax of Rs. 0.48 billion in fiscal 2007 compared to Rs. 0.31 billion in fiscal 2006.
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ICICI Venture Limited:
Funds
Management
Company
ICICI Venture Funds Management Company Limited (ICICI Venture) strengthened its leadership position in private equity in India, with funds under management of about Rs. 98.00 billion at year-end fiscal 2007. ICICI Venture achieved a profit after tax of Rs. 0.70 billion in fiscal 2007 compared to Rs. 0.50 billion in fiscal 2006.
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KEY DOMESTIC SUBSIDIARIES
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ICICI Securities Limited and Primary Dealership Limited:
ICICI
Securities
The securities and primary dealership business of the ICICI group have been reorganised. ICICI Securities Limited has been renamed as ICICI Primary Dealership Limited. ICICI Brokerage Services Limited has been renamed as ICICI Securities Limited and has become a direct subsidiary of ICICI Bank. Erstwhile ICICI Webtrade Limited was amalgamated with ICICI Securities Limited during fiscal 2007. ICICI Securities achieved a profit after tax of Rs. 0.63 billion and ICICI Securities Primary Dealership achieved a profit after tax of Rs. 1.33 billion, in fiscal 2007.
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CONCERNS / RISKS
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Diseconomies of Scale:
The rapid expansion in franchise and employee base has led to the bank compromising in terms of efficiency. Ø The heavy employee intake in the last four fiscals (average 30% growth per year) has escalated the cost to income ratio to 53% in FY07.
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Slippages likely:
The aggressive growth in retail assets seems to have shown a red signal to the bank in FY07, as there has been a visible growth in incremental delinquencies in absolute terms. Ø The accretion of Sangli Bank’s NPAs (which ICICI Bank acquired in FY07) has also added to the bank’s gross NPA levels (2.5% in FY07 from 1.6% in FY06).
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RELATIVE SHARE PRICE PERFORMANCE
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THANK YOU
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doc_353953449.pptx
ICICI bank, its organization structure, its shareholding pattern, operating ratios, Du pont analysis, cashflow analysis, valuation ratios. capital adequacy ratio, cash reserve ratio and NPAs.
Click to add sub-title
OVERVIEW
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ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its whollyowned subsidiary. India's second-largest bank with total assets of Rs. 3,446.58 billion. Most valuable capitalization. bank in India in terms of market
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Ranked third amongst all the companies listed on the Indian stock exchanges in terms of free float market capitalization. Bank has a network of about 950 branches and 3,300 ATMs in India and presence in 17 countries
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SHAREHOLDING PATTERN
ORGANISATION STRUCTURE
RETAIL BANKING
Key statistics as on 31 March 2007 Total retail disbursements Total retail portfolio Retail customer accounts Branches and extension counters ATM network 777 billions 1,277.03 billion 25 million 755 3,271
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Cross-selling new products
The products of life and general insurance subsidiaries to their existing customers is a key focus area for the Bank.
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In fiscal 2007, about 18% of ICICI Prudential Life Insurance Company’s new business was generated through ICICI Bank.
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CORPORATE BANKING
They offer a complete range of corporate banking products including – Rupee and foreign currency debt l Working capital credit l Structured financing l Syndication and transaction l Banking products and services
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Corporate Banking Group
Global Clients Group
Major Clients Group
INTERNATIONAL BANKING
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Strong franchise among non-resident Indians. Technology-enabled access for overseas customers, wide distribution network in India and alliances with local banks in various markets. Over 450,000 NRI customers. Market share in inward remittances into India has increased to over 25% . Holistic product suite across the entire risk spectrum starting from deposits and bonds to the more complex structured derivative products, private equity and real estate.
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BALANCE SHEET
Particulars (Y.E. Mar 31) (Rs. FY 07 FY 06 FY 05 in cr.) Equity Share Capital 899 890 737 Preference Share Capital 350 350 350 Reserves and Surplus 23,414 21,316 11,813 Net Worth 24,663 22,556 12,900 Deposits 230,510 165,083 99,819 Borrowings 51,256 38,522 33,545 Other liabilities & provisions 38,229 25,228 21,396 Total Liabilities 344,658 251,389 167,659 Cash and Bank 37,121 17,040 12,930 Investments 91,258 71,547 50,487 Advances 195,866 146,163 91,405 Fixed Assets 3,923 3,981 4,038 Others 16,490 12,658 8,799 Total Assets 344,658 251,389 167,659
GROWTH RATE
Particulars (Y.E. Mar 31) Equity Share Capital Preference Share Capital Reserves and Surplus Net Worth Deposits Borrowings Other liabilities & provisions Total Liabilities Cash and Bank Investments Advances Fixed Assets Others Total Assets
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FY 07 1.07% 0.00% 9.84% 9.34% 39.63% 33.06% 51.53% 37.10% 117.85% 27.55% 34.00% -1.44% 30.28% 37.10%
FY 06 20.77% 0.00% 80.44% 74.85% 65.38% 14.84% 17.91% 49.94% 31.79% 41.71% 59.91% -1.42% 43.85% 49.94%
In FY 06, Net Worth increased mainly due to increase in Share Premium by Rs. 7,915 cr. In FY 07, balances with RBI increased by 116% and balances with deposit accounts outside India by 138%.
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200% 190% 180% 170% 160% 150% 140% 130% 120% 110% 100%
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ADVANCES
Unsecured to Total Advances
12 10 8 6 4 2 0
Growth of cash credits, overdrafts and loans repayable on demand has reduced from 102.1% in FY 06 to 31.8% in FY 07. Growth of term loans has reduced from 54.7% in FY 06 to 35.3% in FY 07 even though its contribution to total advances has increased from 76.5% in FY 06 to 77.2% in FY 07. Growth of unsecured loans has reduced from 98% in FY 06 to 58.6% in FY 07 even though its contribution to total advances has increased from 17% in FY 06 to 20.2% in FY 07. This has increased resulting in risk of higher NPA. Growth of syndicated loans has increased from 149.1% in FY 06 to 393.5% in FY 07 and also its contribution to total advances has increased from 2% in FY 06 to 7.5% in FY 07. This shows that ICICI Bank is diversifying its risk.
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INVESTMENTS
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Investments in Govt. Securities (both inside and outside India have constantly increased YoY from 68.2% in FY 05 to 73.8% in FY 07. Investments in subsidiaries and/or joint ventures have grown by 103% from Rs. 1,284.8 cr in FY 05 to Rs. 2,607 cr in FY 07. Provision to Total Gross Investment rate has declined from 1.34% in FY 05 to 0.61% in FY 07 showing that the quality of investments have improved over the years. Rate of Provision on Indian Investments is more than rate of provision on outside India investments implying that investments outside India is relatively safer.
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BORROWINGS
Borrowings are increasing consistently YoY from FY 05 (14.8%) to FY 07 (33.1%) due to following reasons: Borrowings outside India by way of Bonds and Notes have increased significantly by 162.2% in FY 07.
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Borrowings outside India from International Banks, Institutions and Consortiums have also increased by 43.1% in FY 07.
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So, in this way ICICI Bank is increasing its exposure in foreign countries.
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PROFIT & LOSS ACCOUNT
Particulars (Y.E. Mar 31) (Rs. in FY 07 FY 06 cr.) Net Interest Income 6,635.79 4,708.6 8 Other Income 5,929.17 4,180.8 9 Net Income 12,564.96 8,889.5 7 Operating Expenses 6,690.56 5,001.1 5 Pre Provision Profit 5,874.40 3,888.4 2 Provisions except tax 2,226.37 791.81 Profit Before Tax 3,648.04 3,096.6 0 Income Tax 537.82 556.53 Tax Rate 14.74% 17.97% Profit After Tax 3,110.22 2,540.0 7 FY 05 2,839.0 0 3,416.1 4 6,255.1 4 3,299.1 5 2,955.9 9 428.80 2,527.2 0 522.00 20.66% 2,005.2 0
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GROWTH RATE
Particulars (Y.E. Mar 31) Net Interest Income Other Income Net Income Operating Expenses Pre Provision Profit Provisions Profit Before Tax Income Tax Tax Rate Profit After Tax
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FY 07 40.93% 41.82% 41.34% 33.78% 51.07% 181.18% 17.81% -3.36% -17.97% 22.45%
FY 06 65.86% 22.39% 42.12% 51.59% 31.54% 84.66% 22.53% 6.62% -12.99% 26.67%
Pre Provision Profit increased by 51% in FY 07 as compared to 32% in FY 06 due to reduction in growth of operating expenses to 34% in FY 07 as compared to 52% in FY 06. Provisions increased significantly during fiscal 2007 because of higher provisions created on standard assets and lower level of write-backs.
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OPERATING EXPENSES
OPERATING EXPENSES % 2007 (Cr) 2006 (Cr) INCREASE % OF TOTAL (2007)
Payments to and provisions for employees
1,616.7
1,082.3
49.38%
24.16%
Rent, taxes and lighting
310.8
234.8
32.37%
4.65%
Printing and stationery
152.5
111.0
37.30%
2.28%
Advertisement and publicity Depreciation on Bank’s property (including non– banking assets) Depreciation (including lease equalisation) on leased assets Directors’ fees, allowances and expenses Auditors’ fees and expenses Law charges
217.7
185.6
17.35%
3.25%
356.5
347.2
2.69%
5.33%
188.3 0.4 2.1 28.5
276.6 0.3 1.8 11.2
-31.94% 18.91% 14.88% 153.48%
2.81% 0.01% 0.03% 0.43%
OPERATING RATIOS
Particulars (Y.E. Mar 31) Yield on Advances Yield on Investments Net Interest Margins Average Yield Cost of Funds Cost of Deposit Cost of Borrowng Spread Cost - Income Tax Rate FY 07 9.41% 7.36% 2.63% 8.92% 6.58% 5.89% 7.60% 2.34% FY 06 8.59% 6.05% 2.62% 8.31% 5.79% 4.41% 7.87% 2.53%
53.25% 56.26% 14.74% 17.97%
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RoA DECOMPOSITION
Particulars (Y.E. Mar 31) NII/Assets Commission & Brokerage/Assets Investment Profit/Assets Other Income/ Asset Net Revenues/Assets Operating Expn/Assets Provisions/Assets Taxes/Assets Total Costs/Assets RoA Average Equity/Assets RoE FY 07 2.23% 1.45% 0.03% 0.51% 4.22% -2.24% -0.75% -0.18% -3.17% 1.04% 0.078 13.37% FY 06 2.25% 1.43% -0.05% 0.61% 4.24% -2.39% -0.38% -0.27% -3.03% 1.21% 0.083 14.62%
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DU PONT ANALYSIS
ICICI Bank 52.95% 46.75% 4.22% 12.81 13.37% HDFC Bank 40.69% 53.68% 6.34% 14.04 19.46% Axis Bank 48.37% 52.87% 4.19% 19.63 21.04% SBI 45.41% 45.82% 4.12% 17.99 15.41%
FY 2007 PAT/ PPP PPP/Net Income Net Income/ Assets Assets / Equity ROE
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ROE & ROCE
Particulars (Rs. in bn) PAT PREF DIV NETWORTH ROE FY 2007 31.1022 0.000035 232.59625 13.37% FY 2006 25.4007 0.000035 173.77985 14.62% Particulars (Rs. in bn) PAT INT ON LT DEB CAP EMP ROCE FY 2007 31.1022 34.11 784.695834 8.31% FY 2006 25.4 28.35 534.81011 3 10.05%
CASH FLOW ANALYSIS
There was an increase in Cash Flow from Operations of 396% whereas Net Profit only increased by 17.8% in FY 07 mainly due to following reasons: Increase in Provisions by 171.7% which is a non-cash expenditure. lDecrease in Investments and Advances Growth by 86.1% and 12.9% respectively. lIncrease in Other Liabilities and Provisions by 94%.
l
There was a decrease in Cash Flow from Investing activities in FY 07 by 133% mainly due to increase in purchase of Held To Maturity securities by 147.9%. There was an increase in Cash Flow from Financing activities in FY 07 by 110% mainly due to increase in net proceeds of bond (incl. subordinate debt) by 18,381.9%.
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VALUATION RATIOS
Particulars (Y.E. Mar 31) EPS (Diluted) (Rs) EPS Growth (%) Book Value (Rs) P/E Ratio (x) (TTM) P/BV (x) (TTM) Dividend Yield (%) (TTM) Particulars (FY 2007) EPS (Diluted) (Rs) EPS Growth (%) Book Value (Rs) P/E Ratio (x) (TTM) P/BV (x) (TTM) FY 07 34.64 7.74% 270.34 33.64 3.58 1.05% FY 06 32.15 17.64% 249.55 21.54 2.36 0.90% FY 05 27.33 3.37% 170.34 15.12 2.31 0.90%
ICICI Bank 34.64 7.74% 270.34 33.64 3.58
Axis Bank HDFC Bank 22.79 33.43% 120.49 34.09 3.46 36.06 36.95% 201.42 38.27 4.94
SBI 86.29 3.06% 594.69 15.53 2.56
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BUSINESS SEGMENT REPORTING
l
Consumer and Commercial Banking segment:
PBT was Rs. 23.38 billion in fiscal 2007 as compared to Rs. 26.55 billion in fiscal 2006 primarily due to an increase in provisions and contingencies and increase in non-interest expense. Ø Net interest income, increased by 32.3% to Rs. 56.53 billion in fiscal 2007 from Rs. 42.73 billion in fiscal 2006, primarily due to an increase in the interest income on advances, offset, in part, by an increase in the interest expense on deposits. Ø General provision on standard assets increased by 115.6% to Rs. 7.31 billion in fiscal 2007 from Rs. 3.39 billion in fiscal 2006.
Ø
l
Investment Banking segment:
Ø Profit before tax of investment banking segment increased
to Rs. 13.48 billion in fiscal 2007 from Rs. 4.80 billion in fiscal 2006 primarily due to increase in non-interest income and net interest income.
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BUSINESS SEGMENT REPORTING
Particulars Revenue contribution to Total Operating profit to Total PBT contribution to Total PBT Asset Utilsed to Total Asset Segment liability to Total Liability Provisions to Total Provision Revenue Growth Operating Profit Growth PBT Growth Provisions Increase Segment Assets Utilisation Ratio 31.03.07 76.87% 76.70% 64.10% 63.59% 76.66% 98.67% 52.38% 33.90% -11.93% 200.11% 10.85%
Consumer and Commercial Banking 31.03.06 78.70% 86.25% 85.74% 66.20% 76.50% 92.45% 39.87% 71.40% 40.13% 9.37%
Investment Banking 31.03.07 23.13% 23.30% 36.95% 36.41% 23.34% 1.33% 69.44% 155.21% 180.86% -50.67% 5.70% 31.03.06 21.30% 13.75% 15.50% 33.80% 23.50% 7.55% 60.79% 31.79% -28.46% 4.97%
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GEOGRAPHICAL SEGMENT REPORTING
Particulars (Rs. in crores) Revenue Assets Revenue to Total Revenue Assets to Total Assets Revenue Growth Domestic Operations 31.03.07 26,896.2 303,967.0 92.99% 88.19% 46.69% 31.03.06 18,334.8 2,29,574.5 95.05% 91.32% Foreign Operations 31.03.07 31.03.06 2,027.3 40,691.1 7.01% 11.81% 112.40% 954.5 21,814.5 4.95% 8.68%
Note: In 2005, no separate disclosure was provided because business was largely concentrated in India.
•
Asset Utilisation Ratio of Foreign Operations is very low compared to Domestic Operations. ICICI Bank is expanding its operations abroad as seen by increase in its revenues from foreign operations.
•
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HIGHEST EXPOSURE IN INDUSTRY
With its recent fundraising, ICICI Bank now has the highest net-worth among all Indian banks and has thus augmented its ability to take on big-ticket exposure required for large projects (banks are not allowed to lend > 15% of their networth to a single project).
Name of Bank ICICI Bank SBI HDFC Bank PNB Axis Bank Net worth (Rs bn) 472 355 130 121 82 Max exposure (Rs bn) 70.80 53.25 19.50 18.15 12.30
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SANGLI BANK ACQUISITION
In Dec-06, ICICI Bank acquired Sangli Bank, a Maharashtrabased old private sector bank, with an asset base of Rs. 21bn. Sangli bank had about 190 branches of which 80% were in the state of Maharashtra and had a strong presence in rural credit. Apart from helping ICICI Bank ramp up its liability base, the network could also aid it in its rural initiative by: lProviding it with the skill set (in form of former Sangli Bank’s employees) to tap into some of the rural markets and
lProviding
a strong presence in the rural and semi urban areas allowing it to tap into that market more effectively.
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CAPITAL ADEQUACY RATIO
2006-2007 Capital Adequacy Ratio (%) Tier I Capital (%) Tier II Capital (%)
HDFC Bank 13.08 8.57 4.51
Axis Bank
SBI
ICICI 11.69 7.42 4.27
11.57 12.34 6.42 5.15 8.01 4.33
CASH RESERVE RATIO (CRR)
In view of rising inflation, RBI has increased CRR from 5% to 6.5% during the fiscal 2007 (At present its at 7%) .
Particulars (Y.E. Mar 31) Investments Advances FY 07 (Cr) FY 06 (Cr) FY 05 (Cr) 91,257.84 71,547.39 50,487.35 195,865.6 146,163.1 91,405.15 Growth Rate Particulars (Y.E. Mar 31) Investments Advances FY 07 FY 06 41.71% 59.91%
27.55% 34.00%
Because of it increase in investments and advances is less in 2007 as compared to last year.
IMPACT OF HIKE IN CRR
The 150 bps hike in Cash Reserve Ratio done by RBI has forced banks to raise lending rates for mortgage loans. However housing finance companies are not impacted by hike in CRR requirements and have not raised rates as much as banks. As a result, ICICI bank has lost market share to its main competitor HDFC.
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DEFERRED TAX
Liability Value FY 2007 Depreciation on fixed assets 654.33 Provision for bad and doubtful debts Others Tax related to foreign branches Total 654.33 Total FY 2006 1175.85 88.4 0.04 1264.2 9 650.15 95 88.07 0.78 834 699.08 is 91.72 charged 790.8 during the Assets Value
Depreciation on fixed assets 669.72 Provision for doubtful debts Capital loss Others Tax related to foreign branches Total 669.72 Total FY 2005 Depreciation on fixed assets 753.77 Provision for doubtful debts Depreciation on fixed assets Others it means more depn Others 22.16 is DTL, Total in P/L (tax) than in P/L 775.93 Total a lot of FA is purchased (books) i.e.
•
year.
•
DTL has increased in FY 07 because of PBDD which has almost doubled.
NPA
Particulars Gross NPA Net NPA Net Customer Assets Gross NPA Ratio (%) Net NPA Ratio (%) Coverage Ratio 2007 41.68 20.19 2006 22.73 10.75 2005 34.37 19.83 978.94 3.51% 2.03% 2,053.74 1,520.07 2.03% 0.98% 58.37% 1.50% 0.71% 63.72%
2007 Industry Amount Retail finance Chemicals & fertilizers Food & beverages Textiles Iron/steel & products Electronics & engineering Services – non finance Services – finance Paper and paper products 31.14 1.64 1.25 0.84 0.77 0.63 0.63 0.19 0.07 0.06 0.01 4.96 42.19 (0.51) 41.68 % 73.8 3.9 3.0 2.0 1.8 1.5 1.5 0.5 0.2 0.1 11.7 100.0
2006
Amount 14.29 1.65 0.67 1.68 0.21 0.55 0.98 0.13 0.07 0.03 0.01 2.68 22.95 (0.22) 22.73
% 62.3 7.2 2.9 7.3 0.9 2.4 4.3 0.6 0.3 0.1 11.7 100.0
Comparison of NPAs (FY 2007) Particulars Gross NPA Ratio (%) Net NPA Ratio (%) ICICI Bank 2.03% 0.98% Axis Bank 1.13% 0.61% HDFC Bank 1.40% 0.43% SBI 2.92%
Automobile (including trucks) Metal & metal products Power Cement Road, port, telecom, urban 1.56% Development & other infrastructure Other Industries Total Interest suspense Gross NPAs
DERIVATIVES
Balance Sheet Management
Market Making
Derivative Products
Risk monitoring of the derivatives portfolio other than credit derivatives is done on a daily basis. • Credit derivative – monthly basis. • Makes provisions on the outstanding positions in trading derivatives for possible adverse movements in the underlying.
•
Marked to Market and resulting gain/loss transferred to P/L
Lead to huge amount of contingent liability
KEY DOMESTIC SUBSIDIARIES
l
share of 30%. In seven years of operation, IPLI has built the largest distribution network (among private players) of about 680 branches and an agency force of more than 235,000.
ICICI Prudential Life Insurance Company: Largest private sector insurance player in India with a market
Source: Markets
CLSA
Asia-Pacific
33
KEY DOMESTIC SUBSIDIARIES
l
ICICI Lombard General Insurance Company:
A joint venture (74:26) between ICICI Bank and Fairfax Holdings of Canada. It is the largest private sector general insurance company with a market share of about 34% among private players.
Source: Markets
CLSA
Asia-Pacific
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KEY DOMESTIC SUBSIDIARIES
l
ICICI Prudential Asset Management Company:
ICICI Prudential Asset Management Company (ICICI AMC) was the second largest mutual fund in India at April 30, 2007 with assets under management of over Rs. 420.00 billion. Prudential ICICI AMC achieved a profit after tax of Rs. 0.48 billion in fiscal 2007 compared to Rs. 0.31 billion in fiscal 2006.
l
ICICI Venture Limited:
Funds
Management
Company
ICICI Venture Funds Management Company Limited (ICICI Venture) strengthened its leadership position in private equity in India, with funds under management of about Rs. 98.00 billion at year-end fiscal 2007. ICICI Venture achieved a profit after tax of Rs. 0.70 billion in fiscal 2007 compared to Rs. 0.50 billion in fiscal 2006.
35
KEY DOMESTIC SUBSIDIARIES
l
ICICI Securities Limited and Primary Dealership Limited:
ICICI
Securities
The securities and primary dealership business of the ICICI group have been reorganised. ICICI Securities Limited has been renamed as ICICI Primary Dealership Limited. ICICI Brokerage Services Limited has been renamed as ICICI Securities Limited and has become a direct subsidiary of ICICI Bank. Erstwhile ICICI Webtrade Limited was amalgamated with ICICI Securities Limited during fiscal 2007. ICICI Securities achieved a profit after tax of Rs. 0.63 billion and ICICI Securities Primary Dealership achieved a profit after tax of Rs. 1.33 billion, in fiscal 2007.
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CONCERNS / RISKS
l
Diseconomies of Scale:
The rapid expansion in franchise and employee base has led to the bank compromising in terms of efficiency. Ø The heavy employee intake in the last four fiscals (average 30% growth per year) has escalated the cost to income ratio to 53% in FY07.
Ø
l
Ø
Slippages likely:
The aggressive growth in retail assets seems to have shown a red signal to the bank in FY07, as there has been a visible growth in incremental delinquencies in absolute terms. Ø The accretion of Sangli Bank’s NPAs (which ICICI Bank acquired in FY07) has also added to the bank’s gross NPA levels (2.5% in FY07 from 1.6% in FY06).
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RELATIVE SHARE PRICE PERFORMANCE
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THANK YOU
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