icici bank analysis_group 4

8/8/2019 ICICI Bank Analysis_Group 4

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Indian Banking IndustryA n analysis

,Institute for Technology and Management KhargharAugust 2010


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Agenda ection I anking industry overview

Global banking industry overview Indian banking industry overview Indian Banks Segmentation Growth Drivers and Challenges Competitive Landscape Banking regulation

ection II CICI bank profile

Company business description and segmentation Company history and details Company milestones

Company financials and trends


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Section I: BankingIndustry overview

Global Bankingoverview


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Due to RBI regulations banking sector is not over exposed in India as in,other economies as US and China but this also represent growth scope

.available to Indian banking industry There is scope of improvement as NPA in India is more than that of

.developed economies In comparison to china banking sector in this.aspect is performing well

Global banking industry overview

:-Source World Bank Database :-Source World Bank Database


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Indian Banking overview


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Economic overview


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; . % . %In d u strial p rod u ction re vive s av e rag e grow th of 1 0 4 in FY1 0 ag a in st 2 7 inF Y 0 9

C a p ita lg o o d s g ro w in g a t d o u b le d ig it p o in t to re v iva lin in v e stm e n t a ctivity

-C a p a city u tilisa tio n su rve y o f R B I in d ica te s u tilisa tio n clo se to p re crisis le v e ls

E xp orts grow in g sin ce N ov e m b er 0 9 oreign Capital Inflows

Net FII inflow of USD 30 bn in FY10 as against net outflow in FY09 . % - -Rupee appreciation of 11 4 vis vis US dollar during FY10

Economic growth fueling bankingperformance

PERATING ENVIRONMENT Y 09 High volatility

,Economic slowdown Weak business sentimentCountered by fiscal and monetary measures

Y 10 Revival in growth Abundant liquidity

( )urrent Scenario FY 11 ,Strong growth momentum Policy tightening &Credit demand expected to increase in retail infrastruc


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,Rapid development in infrastructure iron and steel and computer services have.raised demand for credit projecting healthy growth in the banking sector . % ; . %Gross NPAs same at 1 3 as FY08 in FY09 Loan disbursement grew by 16 04 - . % . %Credit deposit ratio down marginally to 73 9 in FY09 from 74 6 in FY08 . % ,NIM has gone up to 2 4 as compared to previous year however it is less than

the former years . %Interest income as a percentage of total assets has gone up to 7 4 for FY09

. %from 7 1 in FY08 . % %The Total Assets of the Banking Industry grew by 21 2 in 2009 as against 25

Development in new sectors ensuring excellentfuture for banks

:-Source RBI Database


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Income and expense growth rate of SCBs inIndia

Interestincome

*OtherIncome

Totalincome

Interestexpenses

Operatingexpenses

Totalexpenses

Netprofit

CAGR

( - -2004 05 to 2008 09

%25 %21 %24 %30 %15 %25 %25

* ,Other income consist of fee income commissions

:-

S o u r c e

R B I

D a t a

b a s e

:-

S o

u r

c e

R B

I

D a

t a

b a s

e

Other income has show greater growth potential than interest income towardstotal income over the years.

With increase in income a subsequent increase in expense is observed although

operation expense have reduced considerably.


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Banking Segmention


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ndian Banking Industry Segmentation

( ) & .rnment of India GoI make up the largest category in the Indian banking system- & ,ing 1976 1987 are owned jointly by the Central Government concerned State Government a

& . - are capital with private individuals corporates Non nationalized are old and nationa.offices in a foreign country but operate their branches in India



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Growth Drivers


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rowth Drivers to banking industry

Industrial development is fueling rapid economics growth giving banking sector.a major boost

:etail Demand ,Increase in demand for housing Car and personal loans :nfrastructure Infrastructure one of the biggest growth driver is expected

% - .to grow @ 35 3yr CAGR :elecom spectrum lending 3G and broadband spectrum auction have increased

credit demand :ural Penetration Rural penetration by private banks is increasing :xport Imports Increase in export import enhances inland and outland bills

business

:onsolidations and Expansions ,Acquisition merger and expansion by theindustries is very much prevalent since 2009


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Competitive Landscape


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%Pub lic sector b an ks enjoy ove r 7 0 sha re of gross loa ns an d ad van ces

N e w p riva te sector b a n ks h a ve sh ow n d e clin e in g ro w th in te rm s o f a sse ts a n din ve stm e n ts

C re d it d e p o sit ra tio in d ica te Fore ig n b a n ks h a ve b e e n m u ch m ore a g g re ssive in

, ,th eir len d in g follow ed b y th e n e w p riva te sector b a n ks w h ile th e p u b lic.secto r b an ks h a ve b e e n m a in ta in in g a m e d iocre p ath

Competitive Landscape of Indian bankingindustry

:-Source RBI Database:-Source RBI Database


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Public sector banks and private sector banks have show increasing trend in;their respective profit and incomes while foreign banks have shown a

.negative trend

Profits and income of bank group wise



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Banking Regulation


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Banking regulators

Banking companies in india is governed by two main legislations

Banking regulation act 1949 The reserve bank of india act 1934

Reviewing monetary policy to maintain economic and financialstability and to ensure adequate financial resources fordevelopment

Meeting the currency requirement of the public

Promotion of an efficient financial system Foreign exchange reserve management

Quarterly monitoring visits to banks displaying financial andsystemic weaknesses

The department monitors cases of frauds perpetrated in banks andreported to it

Other regulation: The negotiable instruments act 1881

Transfer of property act 1882

Banking secrecy act

Companies act 1956

Bankers book evidence act

Banking companies act 1970/1980 for nationalized bank only


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Regulations (Policy) impact on company

With increase in SLR, lending resources of the banks contract and theircapacity to grant credit is reduced correspondingly or vice versa

CAR Ratio depicts the Solvency Position of the bank

Repo Rate and Bank Rate have direct impact on cost of Fund & profitability ofthe banks.

High credit to deposit ratio increases the profitability of the banksRegulation - Limiting Factor:

Bank cant sanction loan below base rate, despite of having funds they are

underutilized.

Bank have to follow Quota limit while lending to the various sectors(Agriculture, Housing, Education, SSI etc.)

Foreign bank in India:

They have to take the permission of RBI and FEMA

Take over of an Indian bank except for weak bank identified by RBI not

permitted

FDI limit for a foreign bank is 74% of total paid-up capital of the bank.

The initial minimum paid up capital for a new bank is ` 200 crores which isincreased to 300 crore with in 3 years of commencement of business

International: Barriers for Indian banks

Indian bank have to follow that respective country norms as well as the Basel

II norms.


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-A ve ra g e C re d it D e p o sit ra tio o f th e- %b a n kin g in d u stry is 7 0

: : %C A R C a p ita l A d e q u a c y R a tio 9

%, %C R R 6 S LR 2 5

: . - %B a se R a te 7 5 8

: % - . %D e p o sit R a te 6 7 5

: . %S av in g b an kin g rate 3 5

: . %R e p o R a te 5 7 5

: . %R e v e rse R e p o 4 5

A lth ou g h th e critical ra tes h av ere d uce d sin ce th e g lo ba l

( );econo m ic crisis FY0 8 R B I isstill m aintaining a tigh t

m on etary po licy in orde r tocurb inflation an d attain

sta b ility a lo n g w ith su p e rio r.e co n o m ic g ro w th

Current policy rates

:-Source RBI


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Agenda ection I anking industry overview

Global banking industry overview Indian banking industry overview Indian Banks Segmentation Growth Drivers and Challenges Competitive Landscape

ection II CICI bank profile

Company business description and segmentation Company history and milestones Company details Company peer group comparison

Company financials and trends


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usiness Description and segmentation ,CICI Bank Limited a private sector banking company engaged in providing a

range of banking products and financial servicesq Investment Bankingq Commercial Bankingq Retail Bankingq Private Bankingq Asset Managementq Mortgagesq Credit Cards

q Others usiness Segmentation -etail Banking , - .Retail assets business Rural micro banking -holesale Banking , (Corporate Banking business Banking services for

, ), ,government large corporate Treasury Structured finance -roject Finance , & ,Infrastructure Oil Gas Manufacturing and Shipping

sectors

& -nternational Business Special Assets Management Internationaloperations

-orporate Centre , ,Investor relations Risk management Corporate branding

:-Source ICICI bank website


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ompany History and Milestones

:006 1st -Indian bank to issue hybrid Tier 1 perpetual debt in the. , &international markets Opened branches in UK Belgium representative

, & .offices in Bangkok Jakarta Kuala Lumpur :007 - ,Amalgamated Sangli Bank headquartered in Sangli in Maharashtranwhich had

.158 branches in Maharashtra and another 31 in Karnataka :008 - .Launched I Mobile banking transactions through mobile US Federal

.Reserve permitted ICICI to establish branch at New York and Frankfurt 2009: ICICI NRI Services wins Asian Banker Award for Excellence in Business

Model Innovation :010 ( - ) . % . .ICICI Bank announces Base Rate I Base at 7 50 p a Announced merger

- -with Bank of Rajasthan with it through share swap in a non cash deal that, .values the Bank of Rajasthan at about Rs 3 000 crore The Monetary Authority

( ) ( )of Singapore MAS has today granted Qualified Full Banking QFB privileges.to ICICI Bank Singapore branch



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ompany Details ICICI Bank's equity shares are listed in India on

Bombay Stock Exchange National Stock Exchange

( )American Depositary Receipts ADRs listed on the New York Stock Exchange( ).NYSE

Branches 2016 , ATMs ,219 Employees ,4 596 -Presence in 18 countries including - . , , ,Branches in U S Singapore Bahrain Hong Kong - ,Subsidiaries in United Kingdom Russia and Canada



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Peer Group Analysis


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Segmental Analysis


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Revenue from has been increased to more than 3 times from 2006 to

,2010 and is still growing at acceptable pace however pace hasgone down in 2010

There is negative growth in terms of domestic revenues and needs to.take care upon domestic industry BoR acquisition can help

Geographical revenue Segmentation Index

D om estic

%grow th( )yoy

Fo re ign

%G row th( )yoy

B a se y e a rR e v e n u e( )INR Cr

.2 3 2 1 15 1 1 4 0 4( )2 0 0 6 B a s e 1 1

2 0 0 7 .1 1 5 8 1 6 .1 4 4 4 4 4

2 0 0 8 .2 4 6 6 1 1 3 .1 9 9 7 3 8

2 0 0 9 .1 4 9 9 ( )39 .2 7 7 6 3 92 0 1 0 .1 2 3 7 ( )17 .3 1 7 7 1 4

:-Source ICICI Annual Report Computed


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In last years share of retail banking is shrinking due to inclusionof various other segments

Venture fund management has added another revenue potential

Total banking revenue has always ahead of other non banking revenue( , , )taking together all insurance Venture fund others

Segmental Contribution in Revenue


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Life insurance recovered from the losses and earned profits

Contribution of wholesale banking is going down Retail banking earned negative figure which can be a concern as it

form major par of revenues

Treasury and investment banking can be a star product for the future

Segmental Contribution in PBT


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Negative profit of retail banking are very much disastrous as it ismajor revenue base

Wholesale banking growth continued and forms major revenues which isstrong point for the company

General insurance growth is just base effect but growth chances arehigh

Venture fund growth in PBT is less then in revenues which is around

%55

Segmental Growth in Profits

FY09 FY10Retail Banking (Consumer) 5% -2297%Wholesale Banking (Commercial) 94% 107%Treasury/ Investment banking 405% 210%Other Banking Business 396% 127%Life Insurance 57% -32%General Insurance 0% 58633%Venture Fund Management - 37%Others 95% 116%


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Segment Focus

ICICI is focusing on SME under wholesale segment.

Strategies & Initiatives: SME enterprises CEO Knowledge Series- a platform to mentor and

assist entrepreneurs.

SME Enterprises Toolkit- an online business & advisory resource forSME

Emerging India Awards- SME recognition platform

ICICI is also focusing on Rural Banking under retail segment. Strategies & Initiatives:

Offering micro-credit through micro financinginstitutions(MFIs),micro-insurance and micro-investmentproducts.

Financial inclusion through business correspondents, farmerfinancing and integration of agri-value chain.


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New Segment and its impact

Venture capital

Contributing positive to revenues Growth in revenue is as high as 57% Growth in PBT however, is 37% only Provide good growth as market is growing for the segment with the

new industrial transformations and entrepreneurial age

Fu tu re p la n s

se g m e n t w ith n e g a tiv e g ro w th a n d p ro fits

e lla s fo re ig n seg m e n t a s e spe cia lly in fo re ig n th e y h a d a h u g e im p a ct o f re ce ssio n a n d hm e n ts ra th e r th a n h ittin g in d a rk


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egmental Charts on the Basis of BusinessFinancials and Trends

Earning in retail banking shows decline as well as in whole sale banking.

:- , ,ource ICICI Annual Reports 08 09 10- , ,ource ICICI Annual Reports 08 09 10


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Financials and Trends

Decline in treasury and other banking venture due to economic slowdown.

egmental Charts on the Basis of Business



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Financials and Trends

Foreign- emphasis was more on retail segment as ICICI strategy was tobuild more retail deposit franchise. Also was seeking to build stablewholesale funding.

Domestic-

1. emphasis was given to small and medium scale enterprises as it adoptedcluster financing approach to fund small enterprises.

2. In retail loan segment emphasis was given more to Home loan and vehicleloan.

egmental Charts on the Basis of Geography



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Financials and Trends &ividend per Share Earning Per Share

Year EPS DPS

2006 28.55 8.5

2007 34.59 10

2008 37.37 11

2009 33.76 11

2010 36.10 12

:-Source ICICI Annual Report Computed

.aid out per share have shown steady rise Represents strong earning potential an

B ki k h h


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Banking stock show strong growth


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Thank You :Presented By Group 4 Roll No Name71 Ajay Garg50 Arun Thakur

23 Ashish Shrivastava137 Goldi37 Gunjan Agarwal175 Pooja Shugani113 Ruchir Masand22 Yash Ahuja

icici bank analysis_group 4

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