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ICICI Bank: BOM charged 1Q

Jul 23, 2001

ICICI Bank reported a stellar performance in 1QFY02, higher than market expectations. However, the results are not strictly comparable as 1QFY02 includes Bank of Madura's (BOM) performance. As per estimation, BOM seems to have contributed about 25% to ICICI Bank's total profits.

(Rs m)1QFY011QFY02Change
Interest Income 2,836 4,683 65.2%
Other Income 312 1,272 307.2%
Interest Expenditure 1,982 3,186 60.8%
Operating Profit (EBDIT) 854 1,497 75.4%
Operating Profit Margin (%)30.1%32.0% 
Other Expenditure 547 1,382 152.5%
Profit before Tax6191,387124.1%
Provisions & contingencies141457224.5%
Tax 77 278 262.4%
Profit after Tax/(Loss) 401 653 62.6%
Net profit margin (%)14.2%13.9% 
No. of Shares (eoy) 196.8 220.4  
Diluted Earnings per share*7.311.8 
P/E (at current price)  11  

The bank's operating margins improved sharply by 200 basis points compared to corresponding quarter in the previous year. This was mainly due to a reduction of 50 basis points in cost of deposits to 7.5%. The contribution of low cost saving account deposits increased to 11.6% from 7.7% in 1QFY01. Further, retail deposits now account for 62% of total deposits (42% in 1QFY01). The retail initiatives of the bank enabled it to improve its interest spread to 2.8% (2.6% in 1QFY01).

Other income of the bank jumped by over 300%. The contribution of other income to total income consequently increased to 21% from 10% in 1QFY01. The ratio is one of the highest in the sector. The bank's other expenses too grew by 153% on the back of investments in technology and infrastructure. During the quarter, ICICI Bank added 0.5 m new customer accounts taking the total to 37 m accounts. Its network has been expanded to 546 ATMs and 357 branches. The bank's cost to income ratio however, reduced to 50% from 54% as on March 2001.

ICICI Bank's total deposits doubled to Rs 175 bn and customer assets grew by 92% to Rs 103 bn. 84% of the bank's incremental exposure is to clients rated 'A' and above. The bank's investment in infrastructure enabled it to see rapid growth in its business.

During the quarter, ICICI Bank increased the provisions for contingencies amount by 225%, as BOM had relatively higher non-performing assets. However, the gross NPAs of the bank declined by 13% to Rs 3.7 bn. The provision coverage against NPA was 63% as on June 2001. Net NPA ratio of the bank now stands at 1.3%.

At the current market price of Rs 133, ICICI Bank is trading at a P/E multiple of 12x and Price/Book value ratio of 2x, FY02 projected earnings. The bank's capital adequacy ratio at 12.5% is above the minimum required (10%) by the RBI and will allow it to expand its size in future. Investment income contributed 51% to total interest income in the current quarter (45% in FY01). Excessive reliance on investment income could lead to a volatility in the future earnings.

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