ICICI Bank: Capitalising on Retail - 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: Capitalising on Retail

Dec 3, 2004

“The largest provider of retail finance delivering unique value proposition to customers”. Thanks to the paradigm shift in the customer preferences and expectations from the banking industry, ICICI Bank (the only identifiable universal bank in the country) is able to make such claims and leverage on its competencies to access mass retail asset pools. ICICI Bank, with an outstanding book size of Rs 4,000 bn as of September 30, 2004, sees the current fiscal to be a trailblazer, having grown 38% from Rs 2,900 bn on March 31, 2004. The retail disbursements grew by 75% from Rs 191 bn in FY03 to Rs 334 bn in FY04. An analysis into what propelled the bank to aggressively augment its retail portfolio (retail advances comprised 23% of total advances in FY04 as against 18% in FY03) leads us to some interesting conclusions:

Stretched margins: ICICI Bank’s spread is lower than that of other banks due to the high cost liabilities of the erstwhile ICICI and the maintenance of SLR and CRR on these liabilities, which were not subject to these ratios prior to the merger. The bank has witnessed a substantial rise in deposits in recent quarters due to the execution of its strategy of replacing the maturing high cost borrowings of ICICI with the low cost deposits. Although yields on the domestic debt market have been moving up (the 91-day treasury bill cut-off yield has also moved up by about 120 basis points since March 2004, and the yield on 10-year Government of India securities has risen by 200 basis points) the retail credit disbursals seem to fetch the bank a better bargain.

The recent hike in lending rates, including those on home loans by 25 to 75 basis points seems to make the picture better.

Fee income potential: The fee income increased by 39% YoY primarily on account of retail products and services (read home loans and credit cards). Also, for cross selling products of its subsidiaries, the bank leveraged on its retail strength.

Asset quality also matters: The bank has made a deliberate attempt to skew its credit portfolio in favour of retail in an attempt to arrest the high delinquency rate of the corporate loans. This has enabled the bank to improvise on its coverage ratio (Total provisions / Gross NPAs).

The bank has also securitised assets worth Rs 107 bn in FY04, so as to gain liquidity and park the funds in retail assets, which appear to be a safer haven.

Funds need to be deployed: The bank has recently completed its public issue mobilising Rs 35 bn, thus enabling it to tap the significant growth opportunities on the lending side. Reiterating the fact that growth for retail credit is coming out of fundamental changes in the Indian demographic profile and is all set to balloon further, ICICI Bank is firmly positioning itself to capitalise on these gains.

At Rs 344, the bank trades at Price to book value of 2.2 times FY05 expected numbers. 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. However, in the wake of a rise in interest rates, the spreads on the retail story are likely to come under pressure going forward.

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

  

More Views on News

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.

HDFC BANK Announces Quarterly Results (2QFY22); Net Profit Up 18.3% (Quarterly Result Update)

Oct 20, 2021 | Updated on Oct 20, 2021

For the quarter ended September 2021, HDFC BANK has posted a net profit of Rs 91 bn (up 18.3% YoY). Sales on the other hand came in at Rs 335 bn (up 5.6% YoY). Read on for a complete analysis of HDFC BANK's quarterly results.

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.

PNB Reports an Over Three-Fold Jump in Net Profit as Provisions Fall (Views On News)

Aug 3, 2021

The reduction in provisions for bad loans and asset quality stability may have aided the lender's earnings.

Here's Why IndusInd Bank's Net Profit Doubled in the June Quarter (Views On News)

Jul 28, 2021

All you need to know about the latest quarterly results of IndusInd Bank.

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

HDFC BANK SHARE PRICE


Dec 9, 2021 03:37 PM

TRACK HDFC BANK

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

HDFC BANK 8-QTR ANALYSIS

COMPARE HDFC BANK WITH

MARKET STATS