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 Bank: Coming clean - Views on News from Equitymaster
 
 
  • PRINT
  • E-MAIL
  • FEEDBACK
  • A  A  A
  • May 7, 2002

    ICICI Bank: Coming clean

    ICICI Bank declared better than expected fourth quarter performance despite stiff pressure on margins. The bank’s fourth quarter profits increased by 13%, largely driven by treasury gains. As the merger has come into effect on March 30, 2002, ICICI Bank’s profits for FY02 includes only two days profits of ICICI and its merged subsidiaries.

    The bank’s operating margins in the fourth quarter were impacted due to higher deposit mobilizations and substantial addition to SLR (government securities) portfolio to meet the reserve requirements of the merged entity. Since October 2001, the bank has added about Rs 150 bn of deposits, which accounts for a market share of 20% in incremental deposits of the banking system. The bank’s average cost of deposits for FY02 at 7.3% is however on the lower side compared to its private sector peers.

    Click for detailed financial performance

    As a part of the merger exercise, ICICI initiated the process of selling down its assets, creating a market for securitized paper in the country. The group sold assets worth Rs 60 bn and utilized the funds in adhering to the banking regulations (priority sector norms and investments required in G-Secs). After the merger, it has become the second largest financially entity in India, with asset base of over Rs 1 trillion. The bank however, aims to curtail its asset size with growth of 15-20% for the next few years, as compared to a possible 25%. It will securitize the retail assets, which would enable it to reduce the asset size. The CAR of 11.4% for the combined entity is comfortable and the management does not expect to raise fresh capital for few years.

    The combined entity is focusing on increasing the proportion of retail loans as the key growth area. On a merged basis, ICICI Bank’s retail assets witnessed a CAGR of 32% in the last three years and now accounts for 8% of total loans of the bank. The bank is eyeing housing finance market as a potential growth area and expects to maintain a growth rate of 40-45% going forward. In FY02, its housing loan portfolio recorded a strong growth of 230%, though on a smaller asset base of Rs 29 bn. In corporate banking, the entity aims to capture new growth areas including small & medium enterprises and government solutions group. Having become the second largest bank in the country, it has now set its eyes on deposits and fee-based income that the public sector undertakings generate.

    In addition to the loan growth, ICICI has been acting as a major distributor of third party products and the management is of the opinion that the sale of these products will be equal to the deposit mobilization by the bank.

    Before going ahead with the large balance sheet size, the combined entity has made provision for Rs 37.8 bn, which includes Rs 19.5 bn provisions on standard loans and Rs 9.3 bn provision for diminution in value of equity. By providing for higher amounts, the ratio of provisions to loan assets has been increased to 63% and net NPA ratio has come down to 4.7%. In addition the management plans to use any capital gains they might book on the sale of ICICI Bank shares for such higher provisions.

    ICICI Bank’s initiatives to write off the assets would improve its asset quality and is also positive for its market valuations. At the current market price of Rs 120, ICICI Bank trades at adjusted price to book value ratio of 2x. The bank is likely to grow its revenues at a strong rate in the coming years leveraging its large balance sheet size and expanded network. State run banks and other private banks could face challenges with the group’s aggressiveness. The bank’s earning growth is however likely to be flat in the next two years due to higher provisions to cleanup the accounts.

     

     

    Equitymaster requests your view! Post a comment on "ICICI Bank: Coming clean". Click here!

      
     

    More Views on News

    ICICI Bank: Loan Slippages Trending Downwards (Quarterly Results Update - Detailed)

    Aug 10, 2017

    Asset quality will be the key thing to watch out for going forward.

    ICICI Bank: Provision Costs Up 5 Fold In First Half of FY17 (Quarterly Results Update - Detailed)

    Nov 18, 2016

    ICICI Bank declared the results for the second quarter of financial year ending March 2017 (2QFY17). The bank reported a flattish net interest income while net profits grew by 2.4%YoY in 2QFY17.

    IDFC Bank: Strong Trading Income Shields Credit Slowdown (Quarterly Results Update - Detailed)

    Aug 10, 2017

    IDFC Bank is taking steps to address contracting NIMs and successfully transition in to a retail bank.

    Axis Bank: Outside Watchlist Slippages a Big Worry (Quarterly Results Update - Detailed)

    Jul 31, 2017

    Almost 74% of the watchlist as provided by the bank of Rs 226 billion in FY16 has turned into non-performing assets.

    HDFC Bank: Asset Quality Deteriorates due to Farm Loan Waiver (Quarterly Results Update - Detailed)

    Jul 25, 2017

    Asset quality was under pressure on account of farm loan waivers. Despite the higher provisioning, the company reported a healthy profit growth of 20%.

    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.

    A 'Backdoor' to Multibaggers: It's Like Investing in Asian Paints Ten Years Ago(The 5 Minute Wrapup)

    Aug 10, 2017

    Don't miss these proxy bets on growing companies or in a few years you will be looking back with regret.

    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

    ICICI BANK SHARE PRICE


    Aug 18, 2017 (Close)

    TRACK ICICI BANK

    • Track your investment in ICICI BANK with Equitymaster's Portfolio Tracker. Set live price alerts, get research alerts and more. Get access now...
    • Add To MyStocks

    ICICI BANK - DCB BANK COMPARISON

    Compare Company With Charts

    COMPARE ICICI BANK WITH

    MARKET STATS