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ICICI Bank: Great expectations

Jan 17, 2001

ICICI Bank has reported excellent profits and interest income growth of over 50% since the last two quarters. Change in the loan portfolio in favour of retail clients has enabled the bank to improve its operating margins considerably. Further, initiatives taken by the bank in introducing new financial products aggressively has enabled it to acquire the customers. This has added in the topline growth. The bank is expected to maintain its sterling performance for the third quarter ended December 2000. We expect a rise of over 40% in the bank’s interest income with a net profit growth in the range of 70-75% excluding the effect of provisions and contingencies.

Quarterly outlook
(Rs m) 3QFY00 3QFY01E Change
Interest Income 2,055 2,898 41.0%
Other Income 492 541 10.0%
Total Income 2,547 3,439 35.0%
Interest Expenses 1,647 1,941 17.9%
Operating Profit 900 1,497 66.4%
Other Expenses 564 869 54.1%
Depreciation 53 87 64.0%
Profit Before Tax 283 541 91.2%
Tax - 54  
Net Profit 283 487 72.1%
Equity shares (m) 197 197  

Key Ratios
Particulars 3QFY00 3QFY01E
OPM (excl. Other Inc.) 19.9% 33.0%
Tax / PBT 0.0% 10.0%
NPM 11.1% 14.2%
Cash EPS (Rs)* 6.8 11.7
EPS (Rs)* 5.8 9.9

ICICI bank is focusing on top 100 banking centres, which account for around two thirds of the banking business in India. The bank’s technology-intensive distribution network is expected to provide sustainable cost advantages over most competitors in the long term.

The merger with Bank of Madura is expected to affect positively the financials of the bank. Further, the customer base is expected to go up to 2.5 m with more than 370 branches. The only challenge for the bank remains integration of employees.

Another positive signal for the banking sector is the encouraging credit growth. During the period April to December 15, 2000, total credit growth was 20.9% YoY, higher than the 18.7% growth registered a year ago. The buoyant credit demand is expected to further increase the number of customers of the bank.

At the current market price of Rs 158 ICICI Bank is trading at a P/E of 17 times its FY01 projected earnings (including the merger impact).

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