27 May 2013 ICICI Bank Limited Annual General Meeting · PDF fileVoting Advisory May 2013 ICICI Bank Limited 2|P a g e Financial Performance (Standalone) Segmental revenue Particulars

Voting Advisory

May 2013 ICICI Bank Limited 1|P a g e

27 May 2013 ICICI Bank Limited

Company Profile BSE: 532174|NSE: ICICIBANK ISIN: INE090A01013 Industry: Banks Index: S&P Sensex/Nifty Face Value: Rs 10 Mkt Price: Rs 1219.0 Fiscal Year End: March

Financials Particulars FY13 (Rs bn) Total Income 484.2

Net Worth 667.1

Equity Capital 11.5

Market Cap. 1408.2[1] Overview 52 week H/L (Rs.) 768.0/1234.0

Current P/E (x)[s] 16.9

Current P/B (x) [s] 2.1

Current P/E (x) [c] 14.6

Current P/B (x) [c] 2.1 Source: IiAS Research, Market sources [s]Standalone; [c] Consolidated [1[As on 27 May 2013

Previous Advisory ICICI Bank 2012 AGM

Write to us Institutional Investor Advisory Services 15th Floor, West Wing, PJ Tower Dalal Street, Mumbai -400 001 Email: [email protected] www.IiAS.in

Annual General Meeting (AGM) Meeting Date : 24 June 2013, 01:15 PM

Proxy Deadline : 22 June 2013, 01:15 PM

Notice Date : 13 May 2013

Meeting Venue : Sir Sayajirao Nagargruh, Vadodara Mahanagar Seva Sadan, Near GEB Colony, Old Padra Road, Akota, Vadodara 390 020

Company overview ICICI Bank Ltd (‘ICICI Bank’ or ‘the bank’) was established by ICICI Limited (formerly the Industrial Credit and Investment Corporation of India), as a wholly owned subsidiary in 1994. The parent company was later merged with the bank. In 2000, ICICI Bank became the first Indian bank to list on the New York Stock Exchange. The Bank has a network of 3100 branches and 10481 ATM's in India, and has a presence in 19 countries.

Agenda Items

# Type[1] Description of resolution IiAS

Recommendation Indicators

See Legend

1 O Adoption of accounts See Analysis

2 O Dividend on preference shares FOR

3 O Dividend on equity shares FOR

4 O Reappoint KV Kamath as director FOR

5 O Reappoint Tushaar Shah as director FOR

6 O Reappoint Rajiv Sabharwal as director FOR

7 O Reappointment of S R Batliboi & Co as auditors FOR

8 O To appoint branch auditors FOR

9 O Appoint Dileep Choksi as director FOR

10 O Reappoint KV Kamath as chairman and revise his remuneration

FOR

11 O Reappoint Chanda Kochhar as MD & CEO and revise her remuneration

FOR

12 O Reappoint NS Kannan as executive director & CFO and revise his remuneration

FOR

13 O Reappoint K Ramkumar as executive director and revise his remuneration

FOR

14 O Revise remuneration of Rajiv Sabharwal FOR [1]O/S: Ordinary/Special

Executive Summary(click on respective link for detailed analysis)

Category: Accounts

ICICI Bank’s total income has grown by 18% to Rs 484.2 bn in FY13 (Rs 410.4 bn in FY12) and net profit has increased by 28.7% to Rs 83.3 billion (Rs 64.7 bn). Gross NPA has improved to 3.22% (3.62%) and net NPA has remained steady at 0.77% (0.73%). Capital Adequacy Ratio (CAR) is healthy at 18.7%, of which Tier I capital is 12.8%.

Board Appointments

The board comprises of 12 directors, of whom four are executive. The bank classifies all non-executive directors as ‘independent’, however IiAS classifies KV Kamath as non-independent due to his long association of more than three decades with the bank.

Remuneration The bank proposes to increase the remuneration of all executive directors by ~15% w.e.f 1 April 2013. The proposed remuneration is comparable to peers from other private banks. The bank also proposes to increase remuneration of KV Kamath from Rs 2.0 mn pa to upto Rs 5.0 mn pa for five years w.e.f 1 May 2014.

DII 24%

FII 38%

Others 9%

ADR 29%

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Financial Performance (Standalone) Segmental revenue

Particulars FY11 FY12 FY13

(Rs bn)

Interest Income 259.7 335.4 400.8

Non-interest income 66.5 75.0 83.4

Total Income 326.2 410.4 484.2

Operating profit 90.5 103.9 132.0

Operating profit margin (%) 27.7 25.3 27.3

PAT 51.5 64.7 83.3

PAT Margin (%) 15.8 15.8 17.2

Cost income ratio (%) 41.9 42.9 40.5

Total advances 2163.7 2537.3 2902.5

Loans/Deposits (%) 95.9 99.3 99.2

CASA ratio (%) 45.1 43.5 41.9

Capital Adequacy Ratio (%) 19.5 18.5 18.7

Gross NPA/Gross Advances (%)

4.47 3.62 3.22

Net NPA/Net Advances (%) 1.11 0.73 0.77

Earnings per share (Rs) 45.3 56.1 72.2

Book value per share (Rs) 478.3 524.0 578.3

Source: Company Filings

Inner ring represents FY12 data Outer ring represents FY13 data

Public Shareholding > 1% holding

Sr. No.

Name of Shareholder

Total shares held (million)

Shareholding as % of total

1 Deutsche Bank Trust Company Americas (ADR) 336.6 29.2

2 Life Insurance Corporation of India 83.1 7.2

3 Government of Singapore 24.8 2.2

4 Europacific Growth Fund 18.3 1.6

5 Aberdeen Global Indian Equity Fund Mauritius Ltd 18.1 1.6

6 Carmignac Gestion A/c Carmignac Patrimoine 17.8 1.5

7 SBI Life Insurance co. Ltd 13.5 1.2

8 Bajaj Allianz Life Insurance Company Ltd 12.6 1.1

Total 524.8 45.5

Source: BSE filings

Change in Shareholding Pattern (%) Year FII DII Deustche Bank Trust

Co. Americas (ADR) Others

Mar-13 37.9 24.2 29.2 8.7

Dec-12 37.1 24.9 29.1 8.9

Sep-12 36.4 25.4 28.9 9.3

Mar-12 35.8 26.8 26.9 10.6

Mar-11 38.6 24.2 27.0 10.2

Mar-10 37.0 25.2 28.3 9.5

Mar-09 35.5 22.6 27.1 14.8

Mar-08 40.3 17.1 28.6 14.0

Source: BSE, ICICI Bank

Price Performance (not annualized)

3 Yrs – 3 May 2010 to 30April 2013 5 Yrs – 2 May 2008 to 30 April 2013 Source: IiAS Research

12% 11% 14% 13%

24% 24%

3 Yrs 5 Yrs

S&P BSE Sensex

Nifty

ICICI Bank

40%

34%

26% 39%

35%

25%

Treasury

Corporate /WholesaleBanking

RetailBanking

Others

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Category: Accounts

Financial Performance:

Business Risk Indicators Peer Comparison

Parameter FY11 FY12 FY13 Net Interest Margin (%) 2.6 2.7 3.1 Exceptional items as % of total income

- - -

Non-Interest expenses as % of total income

20.3 19.1 18.6

Other income as % of total income 20.4 18.3 17.2

Advances to top 20 borrowers as % of total advances

16.3 15.4 15.4

Investments to total assets as % 33.2 32.6 31.9

Provision coverage ratio (%) 76.0 80.4 76.8

Restructured assets (Rs bn) (standard)

25.3 45.5 53.2

Parameter HDFC Bank

ICICI Bank Axis Bank

ROE (%) 18.6 12.9 20.5

ROA (%) 1.9 1.7 1.7

NIM (%) 4.5 3.1 3.5

Gross NPA (%) 1.0 3.2 1.1

Net NPA (%) 0.2 0.8 0.3

P/BV (x) 4.8 2.1 2.1

Related Party Transactions Annual transactions (Rs.bn)

FY12 FY13 Comment

Insurance premium paid 1.0 1.0 Premium paid to ICICI Lombard General Insurance Co. Ltd. & ICICI Prudential Life Insurance Co. Ltd.

Fees & commission income

3.8 4.7 Largely from ICICI Lombard General Insurance Co. Ltd. & ICICI Prudential Life Insurance Co. Ltd.

Lease of premises, common corporate and facilities expenses

1.1 1.0 Recovery from subsidiaries and associate companies for Lease of premises, common corporate and facilities expenses

Outstanding balance (Rs.bn)

FY12 FY13 Parameter

Net deposits with ICICI Bank

13.7 13.6 Outstanding RPT exposure 21.3% of net-worth

Advances 19.8 19.3 Exposure to controlled entities 0.3% of net-worth Net investments 140.2 137.2 Net Payables (0.4) 0.3

Sectoral exposure

O/S balance (Rs bn)

FY12 FY13

Exposure to real estate sector

814.2 964.3

Exposure to capital markets

203.4 192.5

Audit Integrity Parameter Result Head of audit committee

Independent

% of independent directors in audit committee*

100%

Tenure of auditor 3

O/S: Outstanding balance

Accounting Policies: Accounting Policies Method adopted Impact on P&L ESOP accounting policy Intrinsic value

method Had the Bank adopted the Fair Value method for pricing and accounting of options, PAT would have been lower by Rs 1.9 bn,

13.2 12.7 12.8

6.3 5.8 5.9

0

6

12

18

24

FY11 FY12 FY13

Tier 2 CRAR

Tier 1 CRAR

Resolution 1: Adoption of Accounts

ICICI Bank’s total income has grown by 18% to Rs 484.2 bn (Rs 410.4 bn in FY12) and net profit has increased by 28.7% to Rs 83.3 billion (Rs 64.7 bn). The asset quality continues to remain healthy, gross NPA as a percentage of assets have improved to 3.22% (3.62%) and net NPA as a percentage of assets has remained steady 0.77% (0.73%) respectively. Capital Adequacy Ratio has marginally improved to 18.7% (18.5%), of which Tier I capital is 12.8% (12.7%). Provision Cover Ratio is lower at 76.8% (80.4).

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the basic EPS would have been Rs 70.6 instead of Rs 72.2.

Box 1 – RBI regulations and Basel III norms

As per RBI guidelines under Basel III norms, Indian banks will need to maintain a minimum CAR of 9% in addition to a Capital Conservation Buffer (CCB), which will be in the form of common equity at 2.5% of the risk-weighted assets (RWAs) i.e. the banks' minimum capital adequacy ratio will increase to 11.5% CCB in the form of common equity will be phased-in over a period of four years in a uniform manner of 0.625% per year, commencing from 31 March 2015. CCB is designed to ensure that banks build up capital buffers during normal times (i.e. outside periods of stress) which can be drawn down as losses are incurred during a stressed period.

Table 1: Minimum capital adequacy ratios (CAR) as per regulations

Year Tier I Tier II CCB Total RBI BASEL III (from 31 March 2018)

7% 2% 2.5% 11.5%

RBI BASEL II 6% 3% - 9%

BCBS - BASEL III 6% 2% 2.5% 10.5%

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Category: Dividend

ICICI Bank as at 31 March 2013 has 350 redeemable non-cumulative preference shares of Rs. 10 mn each aggregating to Rs. 3,500 mn. These preference shares were issued to the erstwhile preference shareholders of ICICI Ltd on amalgamation and are redeemable at par on 20 April 2018.

The bank seeks shareholders’ approval to pay a dividend of Rs. 35,000 to its preference shareholders.

IiAS recommends voting FOR the resolution.

IiAS Evaluation Parameters for Dividend Payout

Parameters Analysis Risk Level Details

Has the payout ratio decreased in the last three years? Yes Low Refer table 2

Is growth in dividend higher than growth in profits? No Low Refer table 2

Has the company generated enough cash to pay the proposed dividend? Yes -

Does the company have a stated dividend policy?

Yes, but not

disclosed

-

IiAS Recommendation FOR

Discussion

ICICI Bank has proposed a dividend of Rs. 20 per equity share of face value Rs. 10 for FY13. The total dividend proposed to be paid (including dividend tax) is Rs. 26.0 bn. Between FY11 and FY13, the company’s net profit has increased by 61.7% and total dividend has increased by 42.9%. Over the last three years the dividend payout ratio has ranged from 31% to 35%.

Table 2: Key Data

Particulars in Rs.bn FY11 FY12 FY13

Profit after tax 51.5 64.7 83.3

Profit growth y-o-y (%) 28.1 25.6 28.8

Total dividend (Incl. of tax) 18.2 21.2 26.0

Dividend growth y-o-y (%) 20.8 16.5 22.6

Payout Ratio (%) 35.2 32.8 31.2


Resolution 2: Declare dividend on preference shares

Declare dividend of Rs. 100 per preference share of FV Rs. 10 mn each. IiAS Recommendation: FOR

Resolution 3: Declare dividend on equity shares

Declare dividend of Rs. 20 per equity share of FV Rs. 10 each. IiAS Recommendation: FOR

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Category: Board Composition

IiAS Evaluation Parameters for Board Appointments

Parameter Analysis Risk Level Details

Is the chairman of the board an independent director? No[1] Moderate

Is there a separation in the roles between the Chairman and CEO/MD?

Yes -

Proportion of independent directors on the board 58% Low

Proportion of non-executive directors on the board 67% Low

Does the company have a policy on the retirement age of directors? Yes -

70 years, as

per

regulations

Does the company have a policy on the tenure of independent directors?

Yes -

As per Banking

Regulation Act, 1949

Do all the board committees have at least one independent director? Yes -

Is there any whistleblower policy for the independent directors? Yes -

Proportion of promoter representatives on board N.A. -

Overall Low

[1] IiAS classifies chairman, KV Kamath, as non-independent

N.A. – Not applicable

Table 3: Board composition

Sl.

No Name of director Occupation Age

Tenure

(yrs.)

Attendance at

board meetings

Other

directorships[4]

Compensation

(Rs.mn)

Executive

1 Chanda Kochhar MD & CEO 51 12 100% 4 51.2

2 NS Kannan CFO 47 4 100% 4 35.5

3 K Ramkumar Whole-time director 51 4 100% 2 35.6

4 Rajiv Sabharwal Whole-time director 47 3 100% 2 32.0

Non-Executive Non-independent

5 KV Kamath[1] Chairman 65 17[3] 100% 1 2.9

Non-Executive Independent

6 Homi Khusrokhan Former MD, Tata Chemicals Ltd

69 3 100% 5 0.8

7 Arvind Kumar

Joint Secretary, Department of Financial Services (MoF)

46 2 40% 2 -

8 Swati Piramal Promoter, Piramal Healthcare

57 1 40% 4 0.04

Resolution 4: To reappoint KV Kamath as director Resolution 5: To reappoint Tushaar Shah as director Resolution 6: To reappoint Rajiv Sabharwal as director Resolution 9: To appoint Dileep Choksi as director

IiAS Recommendation: FOR IiAS Recommendation: FOR IiAS Recommendation: FOR IiAS Recommendation: FOR

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9 MS Ramachandran Former Chairman, IOCL

68 4 80% 4 0.7

10 Tushaar Shah Senior Fellow at the International Water Management Institute

61 3 100% - 0.1

11 V Sridar Former CMD, UCO Bank

65 3 100% 8 0.7

12 Dileep Choksi[2] Former Joint Managing Partner, Deloitte India

63 N.A. N.A. 8 N.A.

Source: Company filings and IiAS research [1] ICICI classifies as an independent director [2] Appointed as on 26 Apr 2013 [3] Nominee of ICICI Ltd from 1996 to 2002, CEO & MD from 2002 to 2009 and non- executive chairman from 2009 till date

[4] Includes only Indian public ltd. companies

N.A.: No applicable

Table 4: Proposed Appointments – IiAS Checklist

IiAS Director Checklist KV Kamath Tushaar Shah Rajiv Sabharwal Dileep Choksi

Executive/Non-executive Non-executive Non-Executive Executive Non-Executive

Category of Appointment Independent Independent Non-independent Independent

IiAS Director Classification Non-independent Independent Non-independent Independent

Independence and Tenure X N.A.

Attendance N.A.

Other Affiliations

Shares Held 490,000 Nil Nil 500

ESOPS - - 335,000 -

Qualification

IiAS Recommendation FOR FOR FOR FOR

NA: Not applicable

Director Profiles

KV Kamath

Qualification Degree in mechanical engineering PGDBA from IIM-A

Work experience Over 38 years of experience in banking industry. Ex-MD & CEO of ICICI Bank

Committee memberships

Chairman, Board Governance, Remuneration & Nomination committee Chairman, Credit committee Chairman, Customer service committee Member, Fraud monitoring committee Member, Information technology strategy committee Chairman, Risk committee

Other Directorships[1] Infosys Ltd (L)

Tushaar Shah

Qualification Doctorate

Work experience Economist and public policy specialist Former director, Institute of Rural Management, Anand

Seeking reappointment Seeking appointment

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Committee memberships Member, Corporate social responsibility committee

Dileep Choksi

Qualification Qualified chartered accountant

Work experience Former joint managing partner, Deloitte India

Committee memberships Alternate chairman, Audit committee Member, Fraud monitoring committee Member, Risk committee

Other Directorships[1]

ICICI Lombard General Insurance Company Ltd NSE IT Ltd ICICI Prudential Asset Management Company Ltd 3i Infotech Ltd (L) ICICI Home Finance Company Ltd ACE Derivatives and Commodity Exchange Ltd Datamatics Global Services Ltd (L) Lupin Ltd (L)

Rajiv Sabharwal

Qualification Mechanical Engineer PGDBA from IIM-L

Work experience Over 20 years of experience in banking & financial services

Committee memberships

Member, Fraud monitoring Committee, Member, Asset Liability Management committee Member, Committee of executive directors Member, Committee for identification of wilful defaulters Member, Grievance Redressal Committee for borrowers identified as wilful

defaulters Member, Committee of senior management

Other Directorships[1] ICICI Home Finance Company Ltd ICICI Prudential Life insurance Company

Source: Company filings and IiAS research (L) – Listed company [1] Includes only Indian public ltd. companies Discussion The board of the company has 12 directors. Of these, four are executive and eight are non-executive. Although ICICI Bank classifies all non-executive directors as independent, IiAS categorizes seven of them as independent and considers KV Kamath as non-independent. KV Kamath has been associated with the ICICI group for more than three decades. He was a nominee of ICICI Ltd on board of ICICI Bank from 1996 to 2002 (six years), CEO and Managing Director from 2002 to 2009 (seven years) and as non-executive chairman from May 2009 till date (four years). He has been a CEO and Managing Director of ICICI Ltd. from May 1996 to May 2002. According to clause 49, a director can be independent if – he has not been an executive of the company in the immediately preceding three financial years. IiAS does not consider him as an independent director, given his association with the group for over three decades, including in the years preceding his appointment as chairman. Even after this ‘reclassification’ 50% of the directors are independent and the company is in compliance with clause 49 (- which requires that if the chairman is non-independent, then at atleast 50% of the directors need to be independent).

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Box 2:Tenure of non-executive director

In terms of Section 10A(2-A)(i) of the Banking Regulation Act, 1949 no director of a banking company, other than its chairman or whole-time director, by whatever name called, shall hold office continuously for a period exceeding eight years.

IiAS recommends voting FOR reappointment of KV Kamath, Tushaar Shah and Rajiv Sabharwal and appointment of Dileep Choksi.

Category: Auditors

Discussion Parameter Result Risk Level Details

Is the tenure of the auditor firm more than 10 consecutive years? No -

Has the audit partner been rotated in the last 5 years? Yes -

Does the company have an auditor rotation policy in place? Yes - As per RBI

guidelines

Have the audit fees increased consistently? Yes - Refer table 5

IiAS Recommendation FOR The FY13 accounts of the bank are audited by SR Batliboi & Co. LLP and have been signed by Shrawan Jalan. SR Batliboi and Co. LLP is the statutory auditor of the bank since FY11. Prior to this, BSR & Co. have audited the accounts between FY07 to FY10. Table 5: Auditors’ remuneration

Particulars (Rs. mn) FY11 FY12 FY13

Auditors’ fees and expenses 22.2 25.1 29.3 Source: Company Filings

Box 3: Tenure of auditor

As per Banking Regulation Act 1949, banks can have the same statutory auditor for a maximum period of four years.

The appointment of the bank’s statutory auditors requires prior approval of Reserve Bank of India (RBI). SR Batliboi & Co. LLP appointment is subject to approval by RBI.


Resolution 7: To reappoint SR Batliboi & Co. LLP as statutory auditors ICICI Bank seeks shareholder approval to reappoint SR Batliboi & Co. LLP as statutory auditors and to authorize the board to fix their remuneration. IiAS Recommendation: FOR

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ICICI has around 3100 branches. The bank seeks shareholder approval to appoint branch auditors and approve the board to fix their remuneration. The appointment will be in consultation with the statutory auditors of the bank. The auditors will be responsible for auditing ICICI bank – branch accounts in India and abroad.

These appointments will be in line with RBI guidelines.


Category: Remuneration

In February 2009, KV Kamath was appointed as non-executive chairman of the bank effective 1 May 2009 upto 30 April 2014. As his tenure would conclude before the 2014 AGM, the bank proposes to re-appoint him as non-executive chairman for further five years with effect from 1 May 2014 to 30 April 2019.KV Kamath has been associated as a director with ICICI group since 1996 and has instrumental to the growth and development of the bank. The bank will benefit from his guidance. In 2009, the shareholders had approved a remuneration of Rs 2.0 mn per annum, the bank now proposes to revise his remuneration upto Rs 5.0 mn per annum, effective 1 May 2014. Similar to terms approved in 2009, he would be entitled to sitting fees, maintenance of a chairman’s office, travel expenses on official visits /for attending to his duties as Chairman of the bank. From time to time, the board will approve, within the threshold of upto Rs 5.0 mn, remuneration to be paid to KV Kamath. Any remuneration even within this limit would require prior approval of RBI. Table 6: Remuneration details of KV Kamath Particular (Rs mn) As approved in 2009 Paid in FY13 Proposed w.e.f. 1 May 2014 Remuneration 2.0 2.0 5.0[1] Sitting fees As applicable 0.9 As applicable Total 2.0[2] 2.9 5.0[2] Source: Company Filings [1]Upto Rs 5.0 mn per annum [2] In addition to sitting fees as applicable

Resolution 8: Appointment of branch auditors To authorize the board of directors of the bank to appoint branch auditors and fix their remuneration IiAS Recommendation: FOR

Resolution 10: Reappointment KV Kamath as chairman and revise his remuneration Reappoint KV Kamath as non-executive chairman and revise the terms of remuneration IiAS Recommendation: FOR

Voting Advisory


Table 7: Remuneration/compensation of peers excluding sitting fees

Company Name

Name of Director

Designation

Remuneration

(Rs mn)

Total income (Rs bn)

PAT (Rs bn)

PAT/Total Income

(%)

Mkt Cap (Rs bn)

FY12 FY13 Proposed

HDFC Deepak Parekh

Chairman 15.0 NA NA 211.5 48.5 22.9 1425.6

HDFC Bank

CM Vasudev

Chairman

1.5 NA 419.2 67.3 16.1 1,669.1

ICICI Bank

KV Kamath

Chairman

2.0 5.0[1] 484.2 83.3 17.2 1,384.3

Axis Bank Adarsh Kishore

Chairman

1.5[1] NA 337.3 51.8 15.4 687.4

Kotak Bank

Shankar Acharya

Chairman

1.4[1] NA 92.0 13.6 14.8 584.2

Source: Company Filings NA: Not Available [1] Upto Rs 5.0 mn effective 1 May 2014

KV Kamath would turn 70 on 2 December 2017, as per RBI guidelines a non-executive chairman on a bank should retire at age of 70. As the bank is seeking to reappoint upto 30 April 2019, it would seek approval from RBI for extension of his term beyond the age of 70, upto 30 April 2019. The proposed remuneration, upto Rs 5.0 mn, will be the only form of compensation and is subject to RBI approval. IiAS recommends voting FOR the resolution

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IiAS Evaluation Parameters for Managerial Remuneration

Parameters Result Risk Level Details

Is the remuneration for promoter? No Low

Is the current remuneration higher than peers? Yes Moderate

Is the proposed remuneration in line with industry peers? No Moderate Higher than

peers

Is there a significant hike in remuneration from previous term/year? Yes Moderate Refer table 8 &

9

Is the remuneration commensurate with the growth in profits/operations?

Yes -

Is the proposed resolution open-ended? No -

Is there a component of performance-linked pay in the proposed salary?

Yes Moderate

Does the person have the requisite qualifications? Yes -

Has the company disclosed a clear remuneration policy to the shareholders?

Yes -

Overall Moderate Source: Company Filings, IiAS Research

Discussion In February 2009, shareholders had approved the reappointment of Chanda Kochhar as Joint Managing Director and CFO effective 1 April 2009 upto 30 April 2009 and appointment as Managing Director& CEO effective 1 May 2009 upto 31March 2014. In the AGM held in June 2009, shareholders had approved the appointment of NS Kannan as Executive Director & CFO for a period of five years effective 1 May 2009 upto 30 April 2014 and K Ramkumar as Executive Director for a period of five years effective 1 February 2009 upto 31 January 2014. RBI has approved the appointments. As the terms would conclude in January – April 2014, before the convening of the 2014 AGM, the bank proposes to seek shareholder approval for the reappointment of these directors for a further period of five years and revision in terms of remuneration payable to the directors. These appointments are subject to RBI approval. The bank proposes to reappoint:

1. Chanda Kochhar as Managing Director & CEO effective 1 April 2014 to 31 March 2019. 2. NS Kannan as Executive Director & CFO effective 1 May 2014 to 30 April 2019. 3. K Ramkumar as Executive Director effective 1 February 2014 to 31 January 2019.

Chanda Kochhar started her career with erstwhile ICICI Ltd. in 1984 and was elevated to the board of ICICI Bank in 2001. She was instrumental in establishing ICICI Bank during 1990s and played a role in guiding the bank towards

Resolution 11: Reappointment Chanda Kochhar as Managing Director & CEO and revise her remuneration terms Resolution 12: Reappointment NS Kannan as Executive Director & CFO and revise his remuneration terms Resolution 13: Reappointment K Ramkumar as Executive Director and revise his remuneration terms Resolution 14: Revise the remuneration terms of Rajiv Sabharwal IiAS Recommendation: FOR

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the leadership position. From 2007 to 2009, she was the Joint Managing Director & CFO before her elevation as Managing Director & CEO in 2009. NS Kannan has been with the ICICI Group for about 22 years. He has served in the positions of Chief Financial Officer and treasurer of ICICI Bank and executive director of ICICI Prudential Life Insurance Company. He was designated as Executive Director & CFO on 1 May 2009. K Ramkumar joined the bank in 2001 and has served in Hindustan Aeronautics, Brookebond Lipton India Ltd. and ICI India Ltd in human resources management and manufacturing domains. He has been on board from 2009 as an executive director and is responsible for human resources, customer service and operations. The three directors will not be subject to retirement by rotation during the tenure. However in order to comply with provisions of the Articles of Association of the bank and the Companies Act, 1956, NS Kannan and K Ramkumar shall be liable to retire by rotation if at any time the number of non-rotational directors exceed one third of the total number of directors. Shareholders have approved the appointment and remuneration of Rajiv Sabharwal as Executive Director in 2010 AGM, effective from the date of receipt of RBI approval i.e. 24 June 2010 to 23 June 2015. RBI has approved the appointment upto 23 June 2013, the bank has sought RBI approval for reappointment for further two years effective 24 June 2013 to 23 June 2015. The salary range for the positions of managing director and executive directors have remained the same since 2007. The bank proposes to revise the terms of remuneration for all whole time directors. The bank follows a practice of seeking approval for a minimum and maximum salary range within which the board approves monthly salary as well as annual increments. On an average the board has recommended basic salary increment of 15% over the last two years. Table 8: Remuneration paid to whole time directors for FY13

Sl. No

Terms & Conditions (Rs mn) Chanda

Kochhar NS Kannan K Ramkumar R Sabharwal

1 Salary 15.2 10.1 10.1 9.5

2 Performance bonus for the year[1] 18.0 12.1 12.1 10.4

3 Allowances & perquisites 14.9 9.9 10.0 8.8

5 Contribution to provident fund 1.8 1.2 1.2 1.1

6 Contribution to super annuation fund

- 1.5 1.5 1.4

7 Contribution to gratuity fund 1.3 0.8 0.8 0.8

Total 51.2 35.6 35.7 32.0

8 ESOPS[2[ (no. of options)

FY13 250,000 125,000 125,000 125,000

FY12 210,000 105,000 105,000 105,000

FY11 210,000 105,000 105,000 105,000

Source: Company filings [1] Subject to RBI approval. Bonus will be deferred in line with RBI’s guidelines on compensation with only 60% of the bonus paid on approval and the balance deferred equally over three years [2] Excludes special grant of stock options approved by the RBI - 250,000 for Chanda Kochhar and 150,000 each for NS Kannan, K Ramkumar and RajivSabharwal

Voting Advisory


Box 4: RBI Guidelines on bonus

As per RBI guidelines, dated 13 January 2013, the maximum limit of bonus is 70% of fixed pay (basic plus supplementary allowance) and in case bonus is in excess of 50% of fixed pay, then around 40% to 60% of the bonus needs to be deferred.(http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=6938&Mode=0) ICICI Bank has been disclosing the compensation to its board members on an accrual basis. IiAS expects all banks to disclose the remuneration of its board members on an accrual basis as this is a more transparent disclosure.

Table 9:Existing and proposed monthly salary (Rs mn) w.e.f 1 April 2013 Name Existing

range Median

(A) Proposed

range Median

(B) Increase (B/A) %

Current salary (C)

Proposed salary(D)

Increase (D/C)%

Chanda Kochhar

0.70 - 1.35 1.03 1.35 - 2.60 1.98 92.23 1.27 1.46 15.00

NS Kannan 0.30 - 1.00 0.65 0.95 -1.70 1.33 104.62 0.84 0.97 15.00 K Ramkumar

0.30 - 1.00 0.65 0.95 -1.70 1.33 104.62 0.84 0.97 15.00

Rajiv Sabharwal

0.30 - 1.00 0.65 0.90 - 1.60 1.25 92.31 0.79 0.91 15.00

Source: Company Filings Table 10:Existing and proposed monthly Supplementary Allowance (SA) (Rs mn) Name Proposed range Median Current SA Proposed SA Increase (%)

ChandaKochhar 1.00 -1.80 1.40 0.87 1.00 15.00

NS Kannan 0.68 - 1.23 0.95 0.60 0.69 15.00

K Ramkumar 0.68 - 1.23 0.95 0.60 0.69 15.00

Rajiv Sabharwal 0.65 - 1.20 0.93 0.58 0.66 15.00

Source: Company Filings In addition to salary and supplementary allowance, directors shall be eligible for

1. Perquisites(evaluated as per Income-tax rules wherever applicable and otherwise at actual cost): Furnished accommodation, gas, electricity, water and furnishings, club fees, group insurance, use of car and telephone at residence, medical reimbursement, leave and leave travel concession, education benefits, provident fund, superannuation fund and gratuity. In addition, will be eligible to avail staff loan policy.

2. Bonus: An amount subject to the maximum limit permitted under RBI guidelines The proposed remuneration is subject to RBI approval.

http://www.rbi.org.in/scripts/NotificationUser.aspx?Id=6938&Mode=0

Voting Advisory


The proposed maximum compensation is comparable to remuneration of peers from other private sector banks. (see table 11). Table 11:Remuneration/compensation of peers

FY12-13

Sr. No.

Bank Name

Name of Director

Title

Total Remuneration (Rs mn)

Total income (Rs bn)

PAT (Rs bn)

PAT/Total Income

(%)

Mkt Cap (Rs

bn)

FY12 FY13 FY14

1 HDFC Bank

Aditya Puri MD 50.2 NA 419.2 67.3 16.1 1,669.1

2 ICICI Bank

Chanda Kochhar

MD 41.0[2] 58.2[1] 484.2 83.3 17.2 1,384.3

3 Axis Bank

Shikha Sharma

MD 29.9 NA NA 337.3 51.8 15.4 687.4

4 HDFC Bank

Harish Engineer

ED 35.8 43.7[1] 419.2 67.3 16.1 1,669.1

5 HDFC Bank

Paresh Sukthankar

ED 33.5 NA

6 ICICI Bank

NS Kannan ED 35.6 40.6[1] 484.2 83.3 17.2 1,384.3

7 ICICI Bank

K Ramkumar

ED 35.7 40.6[1[

8 ICICI Bank

R Sabharwal ED 32.0 37.9[1]

Source: Company Filings, IiAS Research Note: ICICI Bank discloses remuneration on an accrual basis [1]Maximum proposed [2] As provided by ICICI Bank. Remuneration as per annual report is Rs 51.2 mn NA: Not Available

Assumptions of remuneration of directors of ICICI Bank for FY14

1. Bonus: Maximum of 70% of fixed pay (salary + SA). 2. Allowance = Proposed supplementary allowance + perquisites as paid in FY13 3. Contribution to PF = 12% of salary 4. Contribution to superannuation = 15% of salary 5. Gratuity = 8.33% of salary

Remuneration for peers is as reported in their respective annual reports.

As per FY13 annual report, remuneration for Chanda Kochhar is Rs 51.2 mn. However ICICI Bank has clarified that

performance bonus disclosed in annual report is on accrual basis. Bonus payment will be deferred in line with

RBI’s guidelines on compensation with only 60% of the bonus paid on approval and the balance deferred equally

over three years). The remuneration payment for FY14 will be on similar lines and will be lower than reported in

table 11.

As a bank, ICICI Bank is governed by the Banking Regulation Act, 1949. Any benefit conferred (monetary or non-monetary) is subject to approval by RBI.

IiAS believes that the ICICI Bank should consider seeking shareholder approval for remuneration for each year with definite terms rather than seek approval with a broad range for a longer tenure. IiAS recommends voting FOR the resolutions.

Voting Advisory


Legend IiAS publishes voting recommendations on shareholder resolutions. These recommendations are non-binding in nature. Investors may have their own voting parameters which may, in some aspects, differ from those of IiAS. On such occasions, investors should use these recommendations as a guiding tool. The data and regulations reviewed while arriving at a recommendation are disclosed to the investors. The objective is to offer the investor clarity regarding the basis for our recommendations. Please note that voting recommendations do not constitute advice to buy, sell or hold securities.

Indicator Meaning Description Common Examples

Governance Issue

This symbol is used for resolutions which indicate poor corporate governance practices or non-compliance with the regulatory provisions. Consequently, they are usually accompanied with an AGAINST recommendation. IiAS may also include measures/best practices which the company can adopt to improve its governance record.

Managerial remuneration, Auditor appointments

Minority shareholder impact

This symbol is used for resolutions which negatively affect the minority shareholders of the company. IiAS usually recommends voting AGAINST such resolutions as they benefit the controlling or a class of shareholders at the expense of others.

Preferential warrants, Differential rights

Moderate -High Risk

This symbol is used for operating decisions taken by the company management and IiAS will usually recommend voting FOR such resolutions. However, they carry an element of risk which may subsequently have a negative impact on the financials. Investors are therefore advised to review the risk factors highlighted by IiAS in its analysis before voting.

Any resolution

Strategic

Indicates a strategic decision of the company, the long term impact of which cannot be accurately ascertained at the time of proposal. These may be accompanied with a FOR or AGAINST recommendation based on a preliminary review of data provided to investors. IiAS recommendations on such strategic decisions are dependent primarily on short-term indicators like market reaction, analyst opinions, valuation impact, etc. Investors may choose to support a resolution in expectation of higher returns.

Mergers, Amalgamations, Hive-offs, Entering new lines of business

Transparency Issue

Indicates lack of adequate information. Even though IiAS provides both FOR and AGAINST recommendations on such resolutions (based on available data), investors are advised to seek further clarifications from the company. Investors should take into account any additional information received from the company before voting.

Any resolution

Valuation

Refers to a valuation impact on the company’s financials. These resolutions are likely to impact the company’s margins and long term profitability. IiAS typically will recommend voting AGAINST such a resolution. Investors are advised to critically review the company’s proposal in such cases. However, theymay choose to support a resolution in expectation of higher returns.

Increase in borrowings. Related party transactions, Excessive dilution

G

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Voting Advisory


Disclaimer

ICICI Prudential Life Insurance Company Limited, a subsidiary of ICICI Bank Limited, holds equity shares in Institutional Investor Advisory Services India Limited (IiAS).

This document has been prepared by Institutional Investor Advisory Services India Limited (IiAS). The information contained herein is from publicly available data or other sources believed to be reliable, but we do not represent that it is accurate or complete and it should not be relied on as such. IiAS shall not be in any way responsible for any loss or damage that may arise to any person from any inadvertent error in the information contained in this report. This document is provided for assistance only and is not intended to be and must not alone be taken as the basis for any Voting or investment decision. The user assumes the entire risk of any use made of this information. Each recipient of this document should make such investigation as it deems necessary to arrive at an independent evaluation of the individual resolutions which may affect their investment in the securities of companies referred to in this document (including the merits and risks involved). The discussions or views expressed may not be suitable for all investors. This information is strictly confidential and is being furnished to you solely for your information. This information should not be reproduced or redistributed or passed on directly or indirectly in any form to any other person or published, copied, in whole or in part, for any purpose. This report is not directed or intended for distribution to, or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction, where such distribution, publication, availability or use would be contrary to law, regulation or which would subject IiAS to any registration or licensing requirements within such jurisdiction. The distribution of this document in certain jurisdictions may be restricted by law, and persons in whose possession this document comes, should inform themselves about and observe, any such restrictions. The information given in this document is as of the date of this report and there can be no assurance that future results or events will be consistent with this information. This information is subject to change without any prior notice. IiAS reserves the right to make modifications and alterations to this statement as may be required from time to time. However, IiAS is under no obligation to update or keep the information current. Nevertheless, IiAS is committed to providing independent and transparent recommendation to its client and would be happy to provide any information in response to specific client queries. Neither IiAS nor any of its affiliates, group companies, directors, employees, agents or representatives shall be liable for any damages whether direct, indirect, special or consequential including lost revenue or lost profits that may arise from or in connection with the use of the information. . The disclosures of interest statements incorporated in this document are provided solely to enhance the transparency and should not be treated as endorsement of the views expressed in the report. The analyst for this report certifies that all of the views expressed in this report accurately reflect his or her personal views about the subject company or companies and its or their securities, and no part of his or her compensation was, is or will be, directly or indirectly related to specific recommendations or views expressed in this report. The information provided in these reports remains, unless otherwise stated, the copyright of IiAS. All layout, design, original artwork, concepts and other Intellectual Properties, remains the property and copyright of IiAS and may not be used in any form or for any purpose whatsoever by any party without the express written permission of the copyright holders.

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