ICICI Bank: Fundamentally strong - Views on News from Equitymaster

Helping You Build Wealth With Honest Research
Since 1996. Try Now

  • MyStocks

MEMBER'S LOGINX

     
Login Failure
   
     
   
     
 
 
 
(Please do not use this option on a public machine)
 
     
 
 
 
  Sign Up | Forgot Password?  

ICICI Bank: Fundamentally strong

Nov 16, 2000

ICICI Bank has reported excellent financial performance during the first half of financial year 2001. The bank’s operating profits showed an impressive growth of 95% and operating margins also increased to 31.8% from 18.5% in the corresponding period in FY00. However, the stock has been hammered on the bourses until recently, due to concerns of higher loan loss provisions and due to expectations of a merger with the parent (ICICI). Apart from these factors the other negatives during the 1HFY01 include:

  • Higher infrastructure and expenditure for retail business.
  • Decline in trading income.
  • Cost to Income ratio increased to 47% (from 34% in 1HFY00).
  • Adverse mark to market impact. This in turn resulted in higher NPA ratio to 1.33% (from 1.14% in FY00).

ICICI Bank is regarded as having an aggressive treasury operation. But in 1HFY01 its income from treasury operations took a hit of 67% and declined to Rs 270 m. Higher interest rates had adversely affected the banks’ bond portfolio valuations. However, as per the recent RBI guidelines, banks, which had to mark 100% of their portfolio to market, now could mark 75% of their portfolio. This is expected to reduce the bank’s mark to market losses on investment portfolio in future. Recently the RBI ruled out a near term merger of the bank with its parent. The announcement has helped in attracting strong buying interest in the stock and it has gained more than 30% in the last two days.

Financial Snapshot
Year End March 31 1HFY00 1HFY01 Change
Interest Income 3,876 5,709 47.3%
Other Income 550 654 18.8%
Total Income 4,426 6,363 43.8%
Interest Expenses 3,161 3,896 23.3%
Operating Profit 1,265 2,467 95.0%
Other Expenses 434 1,151 165.3%
Depreciation 91 112 24.1%
Profit Before Tax 741 1,204 62.5%
Tax 129 137 6.5%
Profit After Tax 612 1,067 74.3%
Provisions & contingencies 171 365 113.7%
Net Profit 442 702 59.0%

Key Ratios
Operating profit margins 18.5% 31.8%
Tax / Profits before tax 17.4% 11.4%
Net Profit margins 11.4% 12.3%
Cash EPS (Rs) 7.14 11.98
EPS (Rs) 4.49 7.13

Also, one should not ignore the following positive factors of the bank and the initiatives taken by it to increase the retail deposits.

  • ICICI Bank’s retail customer base nearly doubled from 0.6 m as on March 2000 to 1.2 m in September 2000 and retail deposits grew by 53%. During the same period the share of retail deposits to total deposits increased to 48% (from 31%).
  • The bank's customer assets registered a year on year growth 85% during the 1HFY01.
  • With the expansion of its product base and client base, the bank’s fee income increased by 100% during the first half of 2001.
  • ICICI Bank has the largest number of Internet banking customers (275,000) and ATMs (311) in the country. Being a part of ICICI group it has the seamless opportunity of cross selling group products to corporates and retail segments.
  • The bank has been appointed as bankers to NSE.
  • Its number of clients in cash management services (CMS) increased to 282 (from 254 as on FY00).

Investments by the bank in infrastructure and increased expenditure for retail business are likely to put pressure on profits in the short term. However, in the long term they are expected to drive topline growth of the bank along with sustained operating margins. At the current market price of Rs 158, ICICI Bank is trading at a P/E of 22 times its 1HFY01 annualised earnings with a Price/Book value ratio of 2 times. Strong fundamentals coupled with expected earnings growth of around 30% for FY01 will drive its future valuations.

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

  

More Views on News

ICICI BANK Announces Quarterly Results (2QFY22); Net Profit Up 17.1% (Quarterly Result Update)

Oct 26, 2021 | Updated on Oct 26, 2021

For the quarter ended September 2021, ICICI BANK has posted a net profit of Rs 63 bn (up 17.1% YoY). Sales on the other hand came in at Rs 235 bn (up 5.6% YoY). Read on for a complete analysis of ICICI BANK's quarterly results.

ICICI Bank's Quarterly Results Sends Stock to 52-Week High (Views On News)

Jul 26, 2021

ICICI Bank expects to maintain margins at the same level in coming quarter.

10 Stocks Fund Managers are Loading Up On (Views On News)

Jun 22, 2021

A list of popular stocks in which mutual funds have significant stake.

7 Stocks that Mutual Funds Can't get Enough of (Views On News)

Dec 1, 2021

Come hell or high water, these are the top Indian stocks which mutual funds never leave.

5 Indian Banks with the Lowest NPAs. Here's How they Did It... (Views On News)

Sep 27, 2021

These banks have managed to maintain their asset quality even in the middle of a pandemic.

More Views on News

Most Popular

Infosys vs TCS: Which is Better? (Views On News)

Nov 26, 2021

In the post pandemic era, the top two IT companies in India are fighting to capture the growing demand for IT.

6 Popular Stocks that Turned into Penny Stocks (Views On News)

Nov 27, 2021

A look at popular stocks that crashed big time and never recovered, i.e. which went from 'Multibaggers to Multibeggers'.

India's Top 5 Monopoly Stocks to Watch Out for (Views On News)

Nov 30, 2021

These 5 companies dominate their sectors with a huge piece of the pie.

6 Penny Stocks that Rallied 1,000%+ in One Year (Views On News)

Dec 6, 2021

These penny stocks shed their penny status by surging 1,000% or more in the last one year.

The Biggest Winners and Losers in India's Transition to Electric Vehicles (Profit Hunter)

Nov 26, 2021

How India's EV transition could be a major headwind for the incumbents.

More

Become A Smarter Investor
In Just 5 Minutes

Multibagger Stock Guide 2022
Get our special report Multibagger Stocks Guide (2022 Edition) Now!
We will never sell or rent your email id.
Please read our Terms

ICICI BANK SHARE PRICE


Dec 8, 2021 12:19 PM

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 - DEUTSCHE BANK COMPARISON

COMPARE ICICI BANK WITH

MARKET STATS