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ICICI Bank: The BOM fillip

Jul 20, 2001

ICICI Bank is set to announce its first quarter results tomorrow. The 1QFY02 results of the bank would not be exactly comparable, as it would include Bank of Madura’s (BOM) performance also. ICICI Bank merged the old private sector bank, BOM, with effect from March ’01. The bank is expected to report impressive growth of 59% in its first quarter total income. Of the total income around 26% is likely to be contributed by BOM. The bank is expected to sustain operating margins of 34%, as 61% of its total deposits are now from retail (27% of the total is low cost deposits). Aggressive retail and technology initiative taken by ICICI Bank is expected to contribute in expanding its business.

Financial performance
(Rs m) 1QFY01 1QFY02E Change
Total Income 3,148 4,988 58.5%
Interest Expenses 1,982 2,914 47.0%
Operating Profit 1,166 2,648 127.1%
Other Expenses 521 1,324 154.3%
Depreciation 27 88 230.7%
Profits before Tax 619 1,236 99.7%
Tax 77 346 351.7%
Provisions & contingencies 141 281 100.0%
Net Profit 401 608 51.6%
Equity shares (m) 197 197  

Key ratios
Particulars 1QFY01 1QFY02E
OPM 30.1% 34.0%
Tax / PBT 12.4% 28.0%
NPM 17.2% 17.8%
EPS (Rs) 8.2 12.4

On the expense side, other expenses of the bank are likely to remain at higher levels as the bank is investing in enhancing retail and technology infrastructure (setting up of call centers, credit card business and ATM network).

ICICI Bank’s loan portfolio is diversified into different industries. Individually each sector accounts for less than 10% of total loans. Financial institutions, power, petrochem, housing and infrastructure are on the top in the total lending portfolio. 83% of total assets are ‘A’ rated indicating low probability of turning into non-performing asset. However, the bank’s exposure to corporate clients is relatively high, which could increase its current NPA ratio of 1.4%. The bank’s NPA coverage ratio of 63% is comparatively better than other private sector banks. ICICI Bank could increase the coverage further in line with international standards.

At the current market price of Rs 134, ICICI Bank is trading at a P/E of 12x and Price/Book value ratio of 2x FY02 projected earnings. As the bank derives almost half of its profits from investment income, it puts a question mark on maintaining future earnings growth.

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