X

Sign up for Equitymaster's free daily newsletter, The 5 Minute WrapUp and get access to our latest Multibagger guide (2017 Edition) on picking money-making stocks.

This is an entirely free service. No payments are to be made.


Download Now Subscribe to our free daily e-letter, The 5 Minute WrapUp and get this complimentary report.
We hate spam as much as you do. Check out our Privacy Policy and Terms Of Use.
ICICI: Matching global peers? - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • Feb 23, 2001

    ICICI: Matching global peers?

    With a meltdown in tech stocks, the focus of the markets worldwide is shifting towards finance and consumer stocks. The key financial stocks are trading at premium valuations (almost near to their 52 week high) with their ability to sustain good growth rates even on large balance sheet size.

    The primary reason for the large financial groups sustaining remarkable growth rates is their diversified focus. Citigroup is the best example of ‘Universal Bank’ (in Indian terms) with services provided by it in more than 50 countries with 1,000 branches. Starting from the traditional lending services to investment banking, and retail business to corporate banking, cash management and commercial insurance. The group also offers services in the areas of asset management and venture capital activities. The high margin retail banking business of the group contributed more than 47% of its total revenues for the year ended December ‘00. This has offered one of the highest profit margins and returns on equity to the Citigroup.

    Comparative financials
    Year ended Dec-00 Dec-00 Dec-00 Mar-01E
    Particulars ($ m) Barclays Plc Citigroup HSBC Holdings ICICI
    Revenues 17,051 52,085 34,862 2,025
    Growth 26.5% 16.0% 19.4% 12.0%
    Operating profits 7,457 21,160 13,340 619
    Growth 11.4% 5.1% 11.5% 9.9%
    Earnings 3,692 12,999 7,886 260
    Growth 40.9% 26.9% 32.7% 0.4%

    Key ratios
    Particulas Barclays Plc Citigroup HSBC Holdings ICICI
    OPM 43.7% 40.6% 38.3% 30.6%
    NPM 21.7% 25.0% 22.6% 12.9%
    ROE 24.0% 25.2% 18.7% 12.1%

    Back to India, the growths of financial institutions (FIs) are marred because of restrictions to enter diversified service areas. Although, the FIs are allowed to transform into ‘Universal Banks’, guidelines are not yet clarified. This limits their future growth prospects and also the valuations.

    ICICI’s current valuations are comparatively lower than its global peers. High levels of NPAs have put a dent on its profit growth and market valuations. Manufacturing and project financing contributes more than 60% of ICICI’s profits where chances of NPAs are comparatively high. This is also reflected from the comparative valuations of select companies where ICICI is hit due to high non-performing assets (7.6% of total advances). We expect the ratio to come down further to 7% in FY03. Nevertheless it is still on the higher side than its global peers.

    Comparative valuations
    Particulars Barclays Plc Citigroup HSBC Holdings ICICI
    P/E (x) 14.2 20.5 21.1 6.3
    Price/Book Value (x) 2.9 4.7 3.7 0.8
    Market Cap/Revenues (x) 3.2 5.2 3.7 0.8
    MC/Assets 0.1 0.3 0.2 0.1

    However, ICICI compares well in terms of productivity parameters. Its ratio of revenues/employee and profits/employee are comparatively higher than Citigroup. ICICI is continuously reshuffling its portfolio from manufacturing to retail finance with innovative structured products and efficient marketing efforts. It has also forayed into new areas like insurance. Once it is allowed to enter into retail banking, cost of funds is expected to come down dramatically. This could effectively lead to increase in operating margins and thus higher bottomline growth. But when this will happen is a question of time and valuations could improve only then.

    Performance parameters
    Particulars Citigroup ICICI
    Revenues/employee ($ m) 0.5 2.0
    Profits/employee ($ m) 0.1 0.3
    Assets/employee ($ m) 7.3 15.8

     

     

    Equitymaster requests your view! Post a comment on "ICICI: Matching global peers?". Click here!

      
     

    More Views on News

    HDFC: Red Flag in Developer Loans (Quarterly Results Update - Detailed)

    Aug 10, 2017

    HDFC starts FY18 on robust loan growth but asset quality slips on increased exposure to developer loans.

    Shriram Trans Fin: FY17 Ends on a Tepid Note due to Regulatory Headwinds (Quarterly Results Update - Detailed)

    Jun 22, 2017

    Demonetisation led slowdown coupled with shift to stringent bad loan norms keep Shriram Transport Finance on a slow wicket.

    Power Finance Corp: Alignment with RBI Norms Knocks Down FY17 Earnings (Quarterly Results Update - Detailed)

    Jun 14, 2017

    Power Finance Corporation earnings hit by RBI mandated higher provision on state government power generation projects where the recovery continues to be 100%.

    IDFC: Ends FY17 on a Healthy Note (Quarterly Results Update - Detailed)

    May 30, 2017

    IDFC regains its tempo in FY17 post the demerger of the banking business.

    HDFC: Conservative Provisioning tempers down FY17 earnings (Quarterly Results Update - Detailed)

    May 9, 2017

    HDFC ends FY17 on a tepid note as it remains conservative on the asset quality front.

    More Views on News

    Most Popular

    Demonetisation Barely Made Any Difference to Tax Collections(Vivek Kaul's Diary)

    Aug 7, 2017

    The data tells us quite a different story from the one the government is trying to project.

    Proxy Plays: A Smart Way to Bet on 'Off Limits' Companies(The 5 Minute Wrapup)

    Aug 4, 2017

    The small-cap space is full of small players that are clear proxies to great growth stories and Indian megatrends.

    Should You Invest In Bharat-22 ETF? Know Here...(Outside View)

    Aug 8, 2017

    Bharat-22 is one of the most diverse ETFs offered so far by the Government. Know here if you should invest...

    Signs of Life in the India VIX(Daily Profit Hunter)

    Aug 12, 2017

    The India VIX is up 36% in the last week. Fear has gone up but is still low by historical standards.

    7 Financial Gifts For Your Sister This Raksha Bandhan(Outside View)

    Aug 7, 2017

    Raksha Bandhan signifies the brother-sister bond. Here are 7 thoughtful financial gifts for sisters...

    More
    Copyright © Equitymaster Agora Research Private Limited. All rights reserved.
    Any act of copying, reproducing or distributing this newsletter whether wholly or in part, for any purpose without the permission of Equitymaster is strictly prohibited and shall be deemed to be copyright infringement.

    LEGAL DISCLAIMER: Equitymaster Agora Research Private Limited (hereinafter referred as 'Equitymaster') is an independent equity research Company. Equitymaster is not an Investment Adviser. Information herein should be regarded as a resource only and should be used at one's own risk. This is not an offer to sell or solicitation to buy any securities and Equitymaster will not be liable for any losses incurred or investment(s) made or decisions taken/or not taken based on the information provided herein. Information contained herein does not constitute investment advice or a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual subscribers. Before acting on any recommendation, subscribers should consider whether it is suitable for their particular circumstances and, if necessary, seek an independent professional advice. This is not directed for access or use by anyone in a country, especially, USA or Canada, where such use or access is unlawful or which may subject Equitymaster or its affiliates to any registration or licensing requirement. All content and information is provided on an 'As Is' basis by Equitymaster. Information herein is believed to be reliable but Equitymaster does not warrant its completeness or accuracy and expressly disclaims all warranties and conditions of any kind, whether express or implied. Equitymaster may hold shares in the company/ies discussed herein. As a condition to accessing Equitymaster content and website, you agree to our Terms and Conditions of Use, available here. The performance data quoted represents past performance and does not guarantee future results.

    SEBI (Research Analysts) Regulations 2014, Registration No. INH000000537.

    Equitymaster Agora Research Private Limited. 103, Regent Chambers, Above Status Restaurant, Nariman Point, Mumbai - 400 021. India.
    Telephone: +91-22-61434055. Fax: +91-22-22028550. Email: info@equitymaster.com. Website: www.equitymaster.com. CIN:U74999MH2007PTC175407
     

    Become A Smarter Investor In
    Just 5 Minutes

    Multibagger Stocks Guide 2017
    Get our special report, Multibagger Stocks Guide (2017 Edition) Now!
    We will never sell or rent your email id.
    Please read our Terms

    TRACK ICICI

    MARKET STATS