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: Making the right moves - Views on News from Equitymaster
  • E-MAIL
  • A  A  A
  • Oct 23, 2004

    ICICI Bank: Making the right moves

    Introduction to results
    ICICI Bank's performance for the September quarter seems rather subdued compared to its performance in the June quarter. While the topline trend remains lackluster (marginal rise) the bottomline growth has been subdued at 10% YoY, mainly on account of higher provisioning requirements, which we believe is primarily on account of depreciation in its investment portfolio. We however need to point out that there is a significant rise in net interest income (45% YoY), signaling the improving performance of the bank's core lending business, which has come despite a marginal rise in the topline.

    (Rs m) 2QFY04 2QFY05 Change 1HFY04 1HFY05 Change
    Income from operations 22,107 22,305 0.9% 45,054 44,263 -1.8%
    Other income 8,622 8,354 -3.1% 15,060 14,931 -0.9%
    Interest expenses 17,383 15,453 -11.1% 35,785 31,105 -13.1%
    Net interest income 4,724 6,852 45.1% 9,269 13,158 42.0%
    Other expenses 6,414 7,688 19.9% 12,353 15,013 21.5%
    Operating profit (1,690) (836)   (3,084) (1,855)  
    Operating profit margin (%) -7.6% -3.7%   -6.8% -4.2%  
    Provisions and contingencies 2,404 1,947 -19.0% 3,641 2,405 -33.9%
    Profit before tax 4,528 5,571 23.0% 8,335 10,671 28.0%
    Tax 514 1,150 123.8% 919 1,943 111.3%
    Profit after tax/(loss) 4,014 4,421 10.1% 7,416 8,728 17.7%
    Net profit margin (%) 18.2% 19.8%   16.5% 19.7%  
    No. of shares (m) 613.4 734.5   613.4 734.5  
    Diluted earnings per share 26.2 24.1   24.2 23.8  
    P/E ratio         12.2  

    India's second largest bank
    ICICI Bank post merger with its parent ICICI has emerged as the second largest bank in the country after SBI in terms of asset size. The bank provides a range of corporate and retail banking services. ICICI Bank also prides itself as the first universal bank in the country due to the fact that it provides a wide variety of services. It is also the first Indian bank to offer Internet banking and also the first Indian bank to list on NYSE. At the end of FY04 the bank had an ATM network of over 1,790 ATMs and 470 branches spread across the country.

    Strong growth in core interest income
    Sales:  ICICI Bank, continues to register spectacular growth (57% YoY) in its retail advances, while its non retail advances have reported a marginal fall in the September quarter. Retail advances now account for nearly 58% of advances compared to 52% a year ago. Despite the strong growth in advances (25%, YoY, in the period ending September 2004), the bank has not been able to grow its topline. This is primarily on account of the fact that while interest income from advances have grown, there has been a decline in interest income from investments. Lower incremental yields are taking a toll on the bank's interest income.

    NIMs, improving still:  The bank has managed to bring down its interest expenses and this has helped it to improve its net interest income and consequently, its net interest margins (NIM). Cost of deposits have reduced to 4.4% in the September quarter from 5.8% last year. In a bid to reduce its interest expenses, the bank is steadily pruning its borrowings in order to leverage more on low cost savings and current deposits. While the bank has not disclosed its net interest margins we believe that there has been an improvement in the same. We expect a continuous improvement in this going forward due to further replacement of erstwhile ICICI's term loans with low cost deposits. All this is likely to lead to a robust growth in net interest income going forward. Operating expenses continue to rise led by the bank's infrastructure expansion initiatives to capture the credit growth potential in the country.

    Fee income growth helps bottomline growth:  There has been a significant improvement (106% YoY) in core fee based income in the September quarter. Treasury income on the other hand has fallen by over 274% YoY, in the September quarter, due to the impact of lower profits from sale of investments (which has been impacted due to rising interest rates). Due to the sharp rise in core fee based income, the bank seems to have mitigated the effect of lower profits from sale of investments. At the same time however we see a fall in provisioning, however not to the extent seen in the June quarter. This may be on account of higher provisioning requirements for impairment of its G-Sec investments. The bank has not provided any breakup of its provisioning and hence we would not be able to provide any further clarity. Lower provisioning for NPAs has also to an extent helped in the improvement of the growth in bottomline. Net NPA to advances ratio stands at 2.6% in 2QFY05 compared to 4.8% in 2QFY04. The ratio however, continues to be higher in comparison to other peers like HDFC Bank, UTI Bank and IDBI Bank.

    What to expect?
    At the current price of Rs 290, the stock is trading at a price to adjusted book value multiple of 1.8 times. ICICI Bank is slowly addressing all the concerns plaguing it and this is likely to improve investor sentiment towards the bank. At the same time it also seems to be effectively addressing competition. With improvement in almost all of its operational parameters we believe ICICI Bank is taking the right steps to emerge as one of the most profitable banks in the country.



    Equitymaster requests your view! Post a comment on "ICICI Bank: Making the right moves". 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...

    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


    Aug 18, 2017 (Close)


    • 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


    Compare Company With Charts