ICICI Bank (BOM:532174)

The Economic Times  Jun 8  Comment 
Investigations into the matter are on and the findings will be out soon, acting finance minister Piyush Goyal told reporters.
The Hindu Business Line  Jun 8  Comment 
The Economic Times  Jun 8  Comment 
Shares of Kotak Mahindra Bank were trading flat around that time.
The Economic Times  Jun 8  Comment 
Buy Zee Entertainment Enterprises Ltd. at a price target of Rs 638.0 .
The Times of India  Jun 8  Comment 
The ministry of corporate affairs is looking into companies involved in the ICICI Bank controversy of an alleged conflict of interest in bank chief Chanda Kochhar’s dealings with certain borrowers, according to a senior official.
The Economic Times  Jun 7  Comment 
The private sector lender is mulling options to file consent plea, an ETNow report said.
Reuters  Jun 7  Comment 
The Nifty rose to a three-week high on Thursday with private-sector lenders such as Axis Bank and ICICI Bank leading gains, a day after the Reserve Bank of India (RBI) raised its policy rate for the first time in over four years.
The Economic Times  Jun 7  Comment 
Hold Indoco Remedies Ltd. at a price target of Rs 190.0 .
The Economic Times  Jun 6  Comment 
Buy Grindwell Norton Ltd. at a price target of Rs 560.
The Times of India  Jun 5  Comment 
Kotak Mahindra Bank chief digital officer Deepak Sharma said, “The familiarity and simplicity of the platform makes it easy for customers to interact with their bank and get answers to queries in a seamless and convenient manner.”
The Hindu Business Line  Jun 4  Comment 
Board to appoint head of enquiry committee soon


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ICICI Bank (Bombay Stock Exchange: 532174) (formerly Industrial Credit and Investment Corporation of India) is India's largest private sector bank and second largest overall in terms of assets.[1] Together with its subsidiaries, ICICI Bank offers a complete spectrum of financial services and products ranging from commercial banking to investment banking, mutual fund to insurance. As on September 30, 2008 the bank had total assets of Rs. 3,849.70 billion and profit after tax Rs. 17.42 billion for the half year ended September 30, 2008. ICICI Bank is also the largest issuer of credit cards in India.[2]

In the absence of retail deposits, the bank’s dependence on high-cost wholesale deposits has grown, bringing down its net interest margin (the spread between the cost of funds and its earnings on such funds). Its low net interest margin is partly compensated by its high fee income, about 40% of its total income, the highest among Indian banks and comparable with global banks.[3] To raise its fee income, it has exposed itself to complicated, structured derivative products both in India and overseas. The high-growth business model has also forced it to frequently raise equity from the market. The bank is constantly under pressure to keep its growth momentum as otherwise the return on its expanding equity shrinks. Between 2004 and 2007, its balance sheet has grown at more than 40% every year. It has also aggressively expanded its overseas presence in past few years, setting up offices 18 countries and building $25 billion (Rs 1.1 trillion) of assets, roughly one-fourth of its book.[3]

This business model worked wonderfully in a booming economy, in 2008, the market conditions have changed. Investors rushed to dump ICICI’s stock, fearing it had huge exposure to Lehman Brothers Holdings Inc., which filed for Chapter 11 bankruptcy in the US.[4] ICICI stock lost about half its value due to the global financial turmoil. ICICI Bank’s exposure to Lehman was actually relatively minuscule, but that did not put a lid on rumours of bank directors selling their stocks and depositors withdrawing money. As declared by ICICI's Joint MD, ICICI Bank is well capitalized[5] with a total capital adequacy ratio of 14% in 2008, which confirms with the Basel II Norms.[6][7]

Company Overview

The bank, headquartered in Mumbai, has a network of about 2100 branches and 5230 ATMs in India and a presence in 18 countries. It offers a wide range of banking products and financial services to corporate and retail customers through its specialized subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. The bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai.[1]
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ICICI Company Structure (as on 31st December, 2007)[8]

Business and Financial Metrics

In the quarter ended September 30, 2008, the bank reported a 42% year-on-year increase in core operating profit. The bank's current and savings account (CASA) ratio increased to 30% in 2008 from 25% in 2007.[9] ICICI's earnings and net income have grown continuously -- its income increased by a compound annual growth rate (CAGR) of 58% from1999-2008 to Rs 31.15 billion.[2] Its interest income has grown at CAGR 56% from 1999-2008. This growth has been sustained in part by achieving robust growth in its fee income from both corporate and retail businesses. Its fee income, about 40% of its total income, is the highest among Indian banks and comparable with global banks. The growth has also been fueled by strengthening its deposit franchise and significantly scaling up its international banking operations.[10]

Key Financial Metrics (in Rs. billions) 2008 2007 2006
Interest Income 340.94 240.02 151.35
Net Income 31.15 26.33 23.99
Net Interest Income / Total Funds (%) 1.96 1.89 2.24
Revenue 605.31 415.42 254.68
Total Assets 4,862.48 3,949.84 2,776.56
Business Per Employee 0.1008 0.1027 0.0905

Source: Company reports

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Net Income and Revenue[11]

Business Segments

Retail Banking (58% of Revenue)

ICICI Bank is the largest provider of retail credit in India.[12] Its total retail portfolio was Rs. 1,316.63 billion at March 31, 2008, constituting 58% of total loans at that date. ICICI has continued its focus on strengthening its retail deposit franchise to create a stable funding base. Its current and savings account (CASA) deposits as a percentage of total deposits increased from 22% at March 31, 2007 to 26% at March 31, 2008, with savings account deposits increasing by 36% during fiscal 2008. During the year, it also expanded its branch network substantially. At March 31, 2008, it had 1,262 branches & extension counters compared to 755 branches & extension counters at March 31, 2007, including the addition of about 200 branches through the merger of Sangli Bank. Its branch network has further increased to 1,367 as of May 31, 2008.[13]

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ICICI Revenue Decomposition (as on 30th September, 2008)[14]

Small Enterprises (8% Revenue)

During fiscal 2008, ICICI's small enterprises customer base increased by 26% to about 1.1 million accounts. It has introduced its service offerings in over 400 new branches, increasing its coverage to over 1,000 branches. During 2008, ICICI focused on product specialization including investment banking for SMEs.[15]

Corporate Banking & Project Finance (13% Revenue)

ICICI offers a complete range of corporate banking products including rupee and foreign currency debt, working capital credit, structured financing, syndication and transaction banking products and services. Fiscal 2008 saw continued demand for credit from the corporate sector, with growth and additional investment demand across all sectors. Making use of its rich international presence, during fiscal 2008, ICICI was involved in 75% of outbound mergers and acquisitions deals from India. It is now a preferred partner for Indian companies for syndication of external commercial borrowings and other fund raising in international markets and has been ranked number one in offshore loan syndications of Indian corporates in calendar year 2007.[15]

Project Finance is the financing of long-term infrastructure and industrial projects based upon a complex financial structure where project debt and equity are used to finance the project, rather than the balance sheets of project sponsors.[16] ICICI has the lead arranger position across a variety of project finance transactions in diverse sectors. In 2008, it also forayed into select international project finance transactions.[17]

International Banking (21% Revenue)

In 2001, ICICI identified international banking as a key opportunity. This business segment is ICICI's highest growth segment (95.6% year-on-year growth). ICICI's international strategy is focused on building a retail deposit franchise, diverse wholesale funding sources and strong syndication capabilities to support its corporate and investment banking business, and achieving the status of a non-resident Indian (NRI) community bank in key markets.[18]

Key Trends and Forces

Indian companies increasing commercial borrowing for both international and domestic growth– a key lever for ICICI's growth

ICICI Bank is a the preferred partner for a large number of Indian companies that need to raise debt from foreign credit markets in the form of external commercial borrowing (ECB). The aggregate external commercial borrowing by Indian companies increased by a CAGR of 59.1% between 2004-07. ICICI Bank is the preferred lead arranger for a large number of these transactions and this revenue stream should continue to boost ICICI’s fee income.[19]

ICICI Bank is currently the best-placed Indian bank to cater to Indian companies’ increasing appetite for international mergers and acquisitions. During fiscal 2008, ICICI was involved in 75% of outbound mergers and acquisitions deals from India. It is now a preferred partner for Indian companies for syndication of external commercial borrowings and other fund raising in international markets and has been ranked number one in offshore loan syndications of Indian corporates in calendar year 2007.[15]

Reserve Bank of India (RBI) approval for new branches leads to increase in low-cost deposits

The RBI approved 587 new deposit-taking branches for ICICI Bank in 2008.[20] In 2007, it had approved 450 branches for ICICI. Bank branch expansion in India is regulated by RBI and banks cannot expand their branch network without RBI’s approval. As low-cost deposits are directly tied to the size of the branch network, the number of branches a bank has, is a key success factor for any bank in India. While public sector banks (state owned banks) enjoy a pre-eminent position in terms of low-cost deposit base (also called CASA deposits in India – stands for Current Accounts and Savings Account), private-sector banks have been increasing their CASA base steadily over the years. ICICI Bank has expanded its CASA market share by 218% over the period of 2003-2007. The bank’s CASA deposits have grown at a CAGR of 61% over the same period, compared with a growth of 17.1% for public-sector banks, 32.5% for private sector banks and 29% for foreign banks in India.[19]

Interest rate fluctuations increase ICICI Bank debt payments

Taking advantage of the easy liquidity conditions in the international markets and depreciating foreign currencies, ICICI Bank
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Borrowing Mix for ICICI Bank (Source: BNP Paribas Research)[21]
dramatically increased its external commercial borrowing between FY04 and FY07 (as the green line in the Borrowing Mix of ICICI graph shows). While this strategy has served it well in the past, the recent turmoil in the international credit markets have caused its borrowing costs (over LIBOR) to widen. The global currencies- American dollar and euro have also appreciated with respect to the Indian Rupee, increasing their borrowing costs.[22] An inability to improve the funding mix in favour of low cost deposits hampers the bank’s ability to improve its net interest margins in line with the competition. Prolonged dependence on wholesale deposits will cause the net interest margins for the bank to be volatile and could result in some loss of market share, especially in the retail lending portfolio.[19]

In the domestic market, RBI had tightened domestic liquidity conditions in 2007 and first half of 2008 through cash reserve ratio increases, repo rate hikes and other mechanisms.[23] Interest rates have been eased in the last quarter of 2008 and this should further boost the bank’s net interest margins.[19]


  • State Bank of India - State Bank of India, a public sector bank, is the largest bank in India.[24] Besides personal and corporate banking, SBI is also involved in NRI (Non Resident Indian) services through its network in India and overseas. It is the only bank that figures in Fortune’s top 100 banks. Its 11,000 branches and 5,600 automatic teller machines give it a reach throughout the length and breadth of the country; its work force of 200,000 dwarfs all other banks in India.[25]
  • Punjab National bank - Punjab National Bank (PNB) is the second largest government-owned commercial bank in India with about 4,500 branches across 764 cities.[26] This financial institution offers services in personal and corporate banking, including industrial, agricultural, and export finance, as well as international banking. It competes with ICICI mostly in retail lending and wholesale businesses[27]
  • HDFC - Housing Development Finance Corporation Limited Bank Limited or HDFC Bank is one of the largest private banks in India.[28] The company competes with ICICI in each segment, over a wide range of banking services covering commercial and investment banking on the wholesale side and transactional/branch banking on the retail side. Recently, HDFC has overtaken ICICI Bank in terms of number of branches.[29] HDFC's Standard Life Insurance company competes with ICICI's insurance subsidiaries. Their mutual fund and asset management businesses are also in direct tussle.
  • Bank of Baroda - Bank of Baroda is another private player. It has an edge over ICICI due to its rich countrywide network of over 2800 branches. It also has significant international presence with a network of 74 offices in 25 countries.[30]
Total Deposits Total Advances Net profit Total Assets Branches
ICICI Bank 2,305.10 1,958.66 31.10 3,453.12 1,400
State Bank of India 4,355.21 3,373.36 45.41 5,665.65 10,186
Punjab National Bank 1, 398.60 1,990.48 20.48 1,990.48 4,500
HDFC Bank 1,007.69 634.27 15.90 1,332.51 1,412
Bank of Baroda 1,520.34 1,067.01 14.35 1,795.99 2,800

(all money figures in Rs. billions, as on 31st March, 2008) Sources: [31] [32] [33]

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Housing Development Finance (BOM:500010)


  1. 1.0 1.1 , ICICI Website
  2. 2.0 2.1 , ICICI Annual Report 2008
  3. 3.0 3.1 , Livemint's critical analysis of ICICI
  4. , New York Times report on Lehman filing for bankruptcy
  5. ICICI's Joint MD on effects of Lehman bankruptcy on ICICI
  6. Wikipedia article on Basel II Accord
  7. , ICICI 2008 Annual Report, Page 66
  8. ICICI Company Structure, BNP Research
  9. , Performance Review – Six months ended September 30, 2008
  10. , ICICI 2008 Annual Report, Page 38
  11. Net Income and Revenue
  12. , Page 38, ICICI Annual Report
  13. , ICICI 2008 Annual Report, Page 38
  14. , ICICI Revenue Decomposition
  15. 15.0 15.1 15.2 , ICICI 2008 Annual Report, Page 39
  16. , Project Finance explained on Wikipedia
  17. , ICICI 2008 Annual Report, Page 40
  18. , ICICI 2008 Annual Report, Page 41
  19. 19.0 19.1 19.2 19.3 BNP Paribas Research
  20. , Livemint news article on HDFC
  21. Borrowing Mix for ICICI Bank
  22. , Indian Rupees to American dollar over 2004-09
  23. , FreshPlaza news article on interest rates in Indian in 2008
  24. , State Bank of India website
  25. , Businessworld article on SBI
  26. , Punjab National Bank website
  27. , Punjab National Bank profile on Hoover's
  28. , HDFC Bank website
  29. , Livemint news article on HDFC
  30. , Bank of Baroda website
  31. , State Bank of India- Financial Highlights
  32. , Rediff Money- HDFC Bank Financial Highlights
  33. , Bank of Baroda- Financial Highlights, Page 9
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