AFM Project Final

8/2/2019 AFM Project Final

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Accounting For ManagersFinancial Statement Analysis

Banking Industry

Lead Company: ICICI Bank

Peer Companies: HDFC Bank, Axis Bank


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Contents

I. INDUSTRY REVIEW - INDIAN BANKING SECTOR

II. ICICI BANK INTRODUCTION

III. PART-1: FINANCIAL ANALYSIS

Liquidity Solvency Profitability

Market Valuation Balance Sheet Analysis Profit & Loss Analysis

IV. PART-2: COMPARATIVE ANALYSIS AXIS & HDFC BANKS

Liquidity Solvency Profitability Market Valuation

V. CONCLUSION


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I. INDUSTRY ANALYSIS: BANKING SECTOR

Banking Sector: Structure

Indian Banking Sector: Advantages

Well-defined regulatory framework: The Reserve Bank of India (RBI) has well-formulatedregulations. Prudent regulatory policies have ensured that Indian Banks emerge unscathed from theglobal credit crisis. India is among the few countries to have implemented Basel II framework

Good mix of public and private sector banks: This provides stability and growth to the economy. Inaddition, non-banking financial institutions, cooperative banks, primary agricultural societies etc., arspread across the country to meet local needs.

Innovation in service delivery: Several innovations have taken place to expand the reach of bankingand to make the service delivery more convenient and affordable. These include the use of BankCorrespondent (BC) model and the advent of mobile banking.

Rising Demand for Banking Services: With a steady increase in working population and disposableincomes, the demand for banking services is likely to remain buoyant. Between 2006 and 2026, theworking population (25-60 years) is expected to increase from 675.8 million to 795.5 million.

Market analysis:

Globalization and liberalization of the Indian economy, and the interest of foreign banks to expand inIndia through the inorganic route, have fuelled growth of the banking industry .

BankingStructure

Co-operatives

Urban Cooperatives

State Cooperatives

ScheduledBanks

CommercialBanks

ScheduledCommercial

Banks

ForeignBanks

PublicSectorBanks

PrivateSectorBanks

RegionalRural Banks Local Banks

Non bankingFinancial

Institutions

FinancialInstitutions NBFCs


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The banking penetration calculated on the basis of total number of credit accounts to total populationwas 95.4 per thousand in 2008 09

There has been a gradual shift in business from public to private and foreign banks.

The banking system in India is dominated by scheduled commercial banks (SCBs) with a pan-Indiapresence. As of March 2010, SCBs controlled most of the assets, with the rest being controlled by alarge number of small cooperative credit institutions with a very limited geographic reach. Within SCBs, public sector banks accounted for 73.7 per cent of the assets and the rest was held byforeign banks and private sector banks.

516.7627.1

758.3

956.3

1177.1

1471.5

1719

412.5491.7

581.3

720.8

902.1

1091.59

1255

7.20%

4.90%

3.50%

2.70%2.40% 2.30% 2.39%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

300

500

700

900

1100

1300

1500

1700

1900

2004 2005 2006 2007 2008 2009 2010

Total Business(LHS) Assets(LHS) NPAs(RHS)

Market share by assets: 2002-03 Market share by assets: 2009-10


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Credit demand from corporate organizations has helped maintain credit growth in recent years.

Growth in savings deposit is expected to increase with an increase in the amount per account and asteady increase in the number of savings accounts as banks reach out to new markets.

Key Trends

Improved risk management practices : Net NPAs, as a percentage of advances, reduced to 1.1 per centin 2009-10 from nearly 8.1 percent in 1996.97.

More emphasis on fee-based services: Banks have started laying more emphasis on fee-basedservices, such as distributing mutual funds and insurance policies, credit cards, wealth managementand equity trading services.

Development of newer modes of banking: India has now entered the era of online banking, e-commerce and m-commerce, which makes banking simple. Also, the use of ATMs and credit cardshas increased significantly in the last few years.

Product innovation: There has been a major change in the products offered by banks, from a fewstandard credit and deposit products to a number of customised offerings to suit the requirements ofvarious categories of customers

33%

50%

29%

11%14%

-7%

45% 44%

25%

11%8%

20%

-10%

0%

10%

20%

30%

40%

50%

60%

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Credit Growth

Growth in Retail Credit Growth in Housing Finance

15%

25%

20%

25%

7%

21%

16% 15%

29%

25%27%

13%

19%22%

16%18% 18%

27%

0%

5%10%

15%

20%

25%

30%

35%

2004-05 2005-06 2006-07 2007-08 2008-09 2009-10

Deposit Growth

Demand deposit Term deposit Saving Bank Deposit


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Alliances with non-traditional players: Banks are now looking for acquisition targets among othercategories of financial institutions, such as non-banking financial companies (NBFCs), developmentfinancial institutions (DFIs), brokerage firms, etc., to provide the entire gamut of financial service

Improved information systems: Banks are aiming to have an improved credit infrastructure, with theformation of Credit Information Bureau (India) Limited (CIBIL). Other credit information bureaus are

expected to further boost the credit infrastructure. Improving performance of PSU banks: Higher growth, improved productivity for branches, better

customer profiles, implementation of technology and improved products, coupled with significantpositive structural changes, have led to the improvement of PSUs on almost all financial andoperational parameters.

Increased scrutiny: Due to the global financial crisis, tighter regulations for non-banking entities are being implemented. Main focus of the regulations has been to provide a level playing field between bank-sponsored NBFCs and non-bank associated NBFCs besides other issues of regulatoryconvergence and regulatory arbitrage

II. ICICI BANK: INTRODUCTION

History:

Established in 1994, ICICI Bank is today the second largest financial services company in India. In lessthan a decade, the bank has become a universal bank offering a well-diversified portfolio of financialservices. It currently has assets of over USD 79 billion, and provides services through a network ofabout 950 branches, 3300 ATMs and a 3200-seat call center (as of 2007).

ICICI bank was set up when the process of deregulation and liberalization had just begun in India,and the Reserve Bank of India had paved the way for private players in the banking sector, which atthat time was dominated by state-owned and foreign banks. Serving a majority of the countryspopulace, state-owned banks had a large branch network, with minimal or no automation and hadlittle focus on service. Foreign banks, on the other hand, deployed high-end technology, hadinnovative product offerings, but had a very small branch network that serviced only corporates andindividuals with high net-worth. Sensing an untapped opportunity, ICICI Bank decided to targetIndias burgeoning middle class and corporate segment by offering a high level of customer serviceand efficiency that rivaled the foreign banks, on a much larger scale, at a lower cost.

III. PART 1 FINANCIAL ANALYSIS

1. Financial Ratios:

a) Gross NPA ratio:

Gross NPA ratio is a very important indicator for financial stability of a bank. It indicates the quality

of assets of a bank. It is expressed as a percentage of total advances.


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b) Capital Adequacy Ratio:

This ratio is used to protect depositors and promote the stability and efficiency of financial systemsaround the world. Its the measure of a bank's capital. It is expressed as a percentage of a bank's risk weighted creditexposures. It is also known as "Capital to Risk Weighted Assets Ratio (CRAR)."

Two types of capital are measured: tier one capital, which can absorb losses without a bank beingrequired to cease trading, and tier two capital, which can absorb losses in the event of a winding-upand so provides a lesser degree of protection to depositors.

2. Operational and Performance Ratios:

a) Deposits & Advances

The deposits in ICICI Bank fell by 7.48% in FY10 and advances fell by 17%. The fall in deposits wasprimarily due to rumours regarding ICICI Banks exposure to sub -prime assets in foreign market,

which led to people shifting their deposits to other banks. The decline in advances can be attributed tothe banks own policy of going slow on advances and concentrate on strengthening the balance sheet.

4.55

5.31

4.67

4.00

4.20

4.40

4.60

4.80

5.00

5.20

5.40

FY09 FY10 FY11

Gross NPA ratio (%)

15.53

19.41 19.54

0

5

10

15

20

25

FY '09 FY '10 FY '11

Capital Adequacy Ratio

CAR of ICICI has been increasing in the last three years, which indicate that bank is sufficientlycapitalized and managed its risk quite well. As theratio is way above stipulated 9%, the bank canexpand its loan portfolio aggressively withoutworrying about CAR.

Gross NPA ratio has shot up in FY10 due to bothincrease in the Gross NPAs and decrease in theadvances as part of the going slow strategy of theICICI bank after the slowdown.


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b) Net Interest Income(NII):

Net interest income is the difference between the interest earned from borrowers and interest paid to lenders.

Net Interest Income = Interest Payments on Assets - Interest Payments on Liabilities

Net interest income can be positive or negative. Net interest income should go up as the yieldcurve steepens (long-term rates rise faster than short-term rates) because the bank is able to paydepositors a relatively low rate, but it can charge its borrowers a higher rate.

c) Net Interest Margin(NIM):

It is a performance metric that examines how successful a firm's investment decisions are compared toits debt situations. A negative value denotes that the firm did not make an optimal decision, becauseinterest expenses were greater than the amount of returns generated by investments.

2256.162183.11

1812.06

2163.66

1300

1500

1700

19002100

2300

2500

FY08 FY09 FY10 FY11

Advances (in bn)

2444.31

2183.48

2020.17

2256.02

1300

1500

1700

1900

2100

2300

2500

2700

FY08 FY09 FY10 FY11

Deposits (in bn)

83.67

81.14

90.17

76

78

80

82

84

86

88

9092

FY '09 FY '10 FY '11

Net Interest Income (in bn)

11.2%

We can observe that the bank has witnessed growthof 11.2% in net interest income in FY11. ICICI Bankregistered negative NII growth, as it aimed tostabilise and consolidate its balance sheet, by goingslow on expansion in the year of economic slowdown.
http://www.investinganswers.com/term/yield-curve-810http://www.investinganswers.com/term/yield-curve-810http://www.investinganswers.com/term/yield-curve-810http://www.investinganswers.com/term/yield-curve-810


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d) Non Interest Income to Total Income Ratio:

Non Interest / Total Income ratio measures the proportion of bank's total income that have beengenerated by non-interest related activities (eg fees and commission, trading gains, forex activitiesetc).

It is calculated as: (Total Income - Interest Income) / Total Income

The interpretation of this ratio is subject to some controversy. Some analysts view a high number asgood, since it shows that the bank is not dependent on its lending activities to generate a profit.However others take the opposite view and view a high number as indicating that the bank isdependent on unstable revenues that are not predicatable for its profitability.

e) CASA as a percent of Total deposits

The CASA (current and savings accounts) ratio is the ratio of deposits in the current and savingsaccounts of a bank to its total deposits.

2.4 2.52.6

0

0.5

1

1.5

2

2.5

3

FY '09 FY '10 FY '11

Net Interest Margin (%)

0.476 0.480

0.424

0.380

0.400

0.420

0.440

0.460

0.480

0.500

FY '09 FY '10 FY '11

Non Interest Income to TotalIncome

Net Interest Margin has remained flat for ICICI Bank as it had been under pressure, partly due to lowinterest margins overseas .

ICICI Banks non-interest income to total incomeratio has declined in FY11, as compared to last yeardue to lower treasury gains and trading profits. The

bank has aimed to further improve the ratio to lend greater stability to its profitability. The bank hasdiversified fee-based product portfolio for both retailand corporate clients.


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A high CASA ratio indicates that a higher portion of the banks deposits come from current andsavings accounts. This means that the bank is getting money at low cost, since no interest is paid onthe current accounts and the interest paid on savings account is usually low.

f) Net NPAs to Advances Ratio:

The net NPA to loans (advances) ratio is used as a measure of the overall quality of the bank's loan

book. An NPA are those assets for which interest is overdue for more than 90 days (or 3 monthsHigher ratio reflects rising bad quality of loans .

3. Profitability Ratios:

a) Net Profit Ratio:

Net profit ratio is the ratio of net profit (after taxes) to net sales. The ratio is very useful as if the netprofit is not sufficient, the firm shall not be able to achieve a satisfactory return on its investment.

28.7

41.745.1

0

5

10

15

20

25

30

35

40

45

50

FY '09 FY '10 FY '11

CASA ratio

2.116 2.153

1.137

0.000

0.500

1.000

1.500

2.000

2.500

FY '09 FY '10 FY '11

Net NPA to advances ratio

ICICI Bank has maintained strong CASA ratio. Itwas low in FY09, primarily due to economicslowdown, leading to withdrawal of cash bycorporate and retail customers.

The banks CASA ratio increased to 41.7% as on March 31, 2010 from 28.7% on March 31, 2009.Improvement in CASA ratio can be attributed to the fact that the bank has significantly strengthened itsdeposit franchise and expanded its branches. ICICI bank had started gaining market share in savingsaccount in FY2010.It has improved its market shareof savings deposits.

ICICI Bank focused on decreasing the NPA toadvance ratio as the NPAs had increasedsubstantially during the financial crisis. ICICI had followed a back-to-basics strategy featuring a focuson better quality assets, far more prudent lending toretail and paring of unsecured loans. This led to asteep decline in NPA to advance ratio.


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This ratio also indicates the firm's capacity to face adverse economic conditions such as pricecompetition, low demand, etc. Higher the ratio the better is the profitability

b) Return on Equity

The amount of net income returned as percentage of shareholders equity. Return on equity measuresa corporations profitability by revealing how much profit a company generates with the moneyshareholders have invested.

Return on Equity = Net Income/Shareholder's Equity

Net income is for the full fiscal year (before dividends paid to common stock holders but afterdividends to preferred stock.) Shareholder's equity does not include preferred shares.

It is also known as "return on net worth" (RONW).

c) Return on Average Assets

An indicator used to assess the profitability of a firm's assets. This metric displays how efficiently acompany is utilizing its assets.

9.7412.17

15.91

0

5

10

15

20

FY '09 FY '10 FY '11

Net Profit Margin

7.7 7.9

9.6

0

2

4

6

8

10

12

FY '09 FY '10 FY '11

Return on equity

ICICI Bank's consolidated net profit shot up 24.9 percent for the FY10 on the back of a surge in corporatelending and a substantial reduction in provisions.

ICICI Banks asset base had declined in the period of global slowdown. Since the bank had to set asidemoney to provide for its bad assets, the return on

equity was low for the FY09 and FY10. It increasedin FY11 owing to the sustainable return on assets.


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4. Valuation Ratios:

a) Earnings per share

The portion of a company's profit allocated to each outstanding share of common stock. Earnings pershare serves as an indicator of a company's profitability.

Calculated as:

b) Price Earnings Ratio(P/E ratio)

P/E ratio is a valuation ratio of a company's current share price compared to its per-shareearnings.

P/E ratio for ICICI Bank is calculated taking into account FY11 earnings and share price of 31

August 2011.

1%1.10%

1.34%

0%

1%

1%

2%

FY '09 FY '10 FY '11

Return on Average Assets

33.76 36.1

44.73

0

10

20

30

40

50

FY '09 FY '10 FY '11

Earnings Per Share

ICICI banks asset quality has been stabilizing. With

NPAs decling for the FY11 accompanied with thedeclin in NPA provisions driving an improvement in

RoA to 1.4%.

EPS of ICICI Bank has been increasing over the lastthree years, which is a positive indicator.


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P/E ratio = Market price of share/EPS = 18.93

P/E ratio for HDFC Bank is on a higher side for ICICI Bank indicating that the stock is highly valued inthe market, and hence, is available at a premium.

5. Balance Sheet Analysis:

KEY POINTS:

Equity share capital has recorded a steady increase over the last five years. In the period between March '09 and March '10, it rose by 3.3% to settle at Rs. 1151.82 crores.

Prefrence Share capital remained at zero as was the case in the year ending March 2010.ICICIlast issued preference shares worth Rs. 350 crores in FY '09.

Reserves rose nearly 7% to end at Rs. 53938.82 crores as compared to Rs. 50503.48 crores in FY'10.

The bank's net worth rose 6.7% to 55090 crores from 51618 crores in the previous year in FY'10.

Deposits rose 11.7% to Rs. 225,602 Crores.

Borrowings rose 16.2% to Rs. 109,554 Crores.

Total debts rose 13.12% to Rs. 335,156 Crores.

Secured Loans rose to 109,554 Crores, an increase of 16.23%.

Unsecured Loans rose to 225,602 Crores, an increase of 11.7%.

Total liabilities including some other liabilities stood at Rs. 406233.67 Crores, an increase of11.78%.Out of this Total Current Liabilities (Current Liabilities + Provisions) accounted for Rs.15,986.35 Crores.

ASSETS

Cash & Balance with RBI sttood at 20906.97 Crores as compared to Rs.27,514.29 Crores, adecrease of 24%.

Balance with Banks, Money at Call rose to 13,183.11 Crores from 11359.40 Crores, an increaseof 16%.

Total current assets rose from 239,294 Crores to 266,803 Crores, an increase of 11.5%. Netcurrent assets, therefore stood at Rs. 250,817 Crores as compared to Rs. 223,793 Crores, an

increase of 12.07%.


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Misc. expenses were absent, consistent with the company's reports over the last four years.

OTHER HIGHLIGHTS

Investments rose to Rs. 134,685 Crores from Rs. 120,892 Crores, an increase of 11.4%.

ANALYSIS

1.) Cash and cash equivalents include cash in hand and balances with RBI and other banks,including money at call and short notice. Cash and cash equivalents decreased from ` 388.73 billion at March 31, 2010 to ` 340.90 billion at March 31, 2011.

The decrease was primarily due to a decrease in balances with RBI from ` 241.73 billion atMarch 31, 2010 to ` 171.23 billion at March 31, 2011 due to higher than stipulated CRR balancemaintained at March 31, 2010.

2.) Total investments increased by 11.4% from 1,208.93 billion at March 31, 2010 to 1,346.86 billion at March 31, 2011 (including ` 70.96 billion of Bank of Rajasthan at August 12, 2010),primarily due to an increase in investment in corporate bonds and debentures by 125.1 1 billion, RIDF and other related investments in lieu of shortfall in directed lendingrequirements by 49.70 billion (including ` 21.34 billion of Bank of Rajasthan at August 12,2010) and investments in commercial paper and certificate of deposits by ` 31.21 billion.

The investment in pass-through certificates decreased by 15.93 billion at March 31,2011 compared to March 31, 2010. At March 31, 2011, the bank had an outstanding netinvestment of 28.31 billion in security receipts issued by asset reconstruction companies in

relation to sale of non-performing assets compared to 33.94 billion at March 31, 2010. AtMarch 31, 2011, ICICI had a gross portfolio of funded credit derivatives of 10.60 billion andnon-funded credit derivatives of 28.17 billion, which includes 0.22 billion as protection bought by ICICI.

3.) Net advances increased by 19.4% from 1,812.06 billion at March 31, 2010 to 2,163.66 billion atMarch 31, 2011 primarily due to increase in domestic corporate loans, overseas corporateloans and loans taken over from Bank of Rajasthan amounting to 65.28 billion at August 12,2010. Net retail advances increased by 5.8% from 790.62 billion at March 31, 2010 to 836.75 billion at March 31, 2011. In rupee terms, net advances of overseas branches (including

offshore banking unit) increased by 22.1% from 451.37 billion at March 31, 2010 to 550 .97 billion at March 31, 2011.

4.) Fixed assets increased by 47.7% from 32.13 billion at March 31, 2010 to 47.44 billion at March31, 2011 (including 5.15 billion of Bank of Rajasthan at August 12, 2010) primarily due to partcapitalisation of the Banks new building in Hyderabad and increase in the branch networkand other offices. Other assets decreased by 14.9% from 192.15 billion at March 31, 2010 to163.48 billion at March 31, 2011.

5.) Total liabilities (including capital and reserves) increased by 11.8% from ` 3,634.00 billion at


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March 31, 2010 to 4,062.34 billion at March 31, 2011 (including ` 155.96 billion of Bank ofRajasthan at August 12, 2010), primarily due to an increase in deposits and borrowings.Deposits increased from ` 2,020.17 billion at March 31, 2010 to ` 2,256.02 billion at March 31,2011.

6.) Equity share capital and reserves increased from ` 516.18 billion at March 31, 2010 to ` 550.91 billion at March 31,2011 (including statutory reserve of ` 2.00 billion taken over from Bank ofRajasthan at August 12, 2010) primarily due to allotment of shares to the shareholders of Bankof Rajasthan and annual accretion to reserves out of profit.

Excess of paid-up value of equity shares issued over the fair value of the net assetsacquired in the amalgamation and amalgamation expenses, amounting to ` 2.10 billion have been adjusted against the securities premium account.

7.) Deposits increased by 11.7% from ` 2,020.17 billion at March 31, 2010 to ` 2,256.02 billion at

March 31, 2011 (including ` 134.83 billion of Bank of Rajasthan at August 12, 2010). Termdeposits increased from ` 1,178.01 billionn at March 31, 2010 to ` 1,239.55 billion at March 31,2011 (including ` 88.02 billion of Bank of Rajasthan at August 12, 2010), while savings depositsincreased from ` 532.18 billion at March 31, 2010 to ` 668.69 billion at March 31, 2011(including ` 34.48 billion of Bank of Rajasthan at August 12, 2010) and current depositsincreased from ` 309.98 billion at March 31, 2010 to ` 347.78 billion at March 31, 2011(including ` 12.32 billion of Bank of Rajasthan at August 12,2010). Total deposits at March 31,2011 formed 67.4% of the funding (i.e. deposits and borrowings, otherthan preference sharecapital).

During fiscal 2010 and fiscal 2011, ICICI focussed on our strategy of increasing theshare of current and savings account deposits in total deposits and re-balancing our funding

mix. The current and savings account deposits increased from ` 842.16 billion at March 31,2010 to ` 1,016.47 billion at March 31, 2011 (including ` 46.80 billion of Bank of Rajasthan atAugust 12, 2010) and the ratio of current and savings account deposits to total depositsincreased from 41.7% at March 31, 2010 to 45.1% at March 31, 2011.

8.) Borrowings increased by 16.2% from ` 942.64 billion at March 31, 2010 to ` 1,095.54 billion atMarch 31, 2011 primarily due to an increase in call and term borrowings and an increase incapital-eligible borrowings in the nature of sub-ordinated debt. The capital-eligible borrowings in the nature of sub-ordinated debt increased to ` 363.91 billion at March 31, 2011compared to ` 329.67 billion at March 31, 2010. RBI issued guidelines, effective April 1, 2010,

which require market repurchase transactions (previously accounted for as sale andrepurchase) to be accounted for as borrowing and lending. The transactions with RBI underLAF which are accounted for as sale and purchase transactions.

6. Profit and Loss Statement Analysis


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ICICI Bank- Profit and Loss Statement

Profit & Loss account ------------------- in Rs. Cr. -------------------

Mar '11 Mar '10 Mar '09 Mar '08 Mar '07

12 mths 12 mths 12 mths 12 mths 12 mths

IncomeInterest Earned 25,974.05 25,706.93 31,092.55 30,788.34 22,994.29Other Income 7,108.91 7,292.43 8,117.76 8,878.85 6,962.95Total Income 33,082.96 32,999.36 39,210.31 39,667.19 29,957.24Expenditure

Interest expended 16,957.15 17,592.57 22,725.93 23,484.24 16,358.50Employee Cost 2,816.93 1,925.79 1,971.70 2,078.90 1,616.75Selling and Admin Expenses 3,785.13 6,056.48 5,977.72 5,834.95 4,900.67Depreciation 562.44 619.50 678.60 578.35 544.78Miscellaneous Expenses 3,809.93 2,780.03 4,098.22 3,533.03 3,426.32Preoperative Exp Capitalised 0.00 0.00 0.00 0.00 0.00Operating Expenses 8,594.16 10,221.99 10,795.14 10,855.18 8,849.86Provisions & Contingencies 2,380.27 1,159.81 1,931.10 1,170.05 1,638.66Total Expenses 27,931.58 28,974.37 35,452.17 35,509.47 26,847.02


12 mths 12 mths 12 mths 12 mths 12 mths

Net Profit for the Year 5,151.38 4,024.98 3,758.13 4,157.73 3,110.22Extraordionary Items -2.17 0.00 -0.58 0.00 0.00Profit brought forward 3,464.38 2,809.65 2,436.32 998.27 293.44Total 8,613.59 6,834.63 6,193.87 5,156.00 3,403.66Preference Dividend 0.00 0.00 0.00 0.00 0.00Equity Dividend 1,612.58 1,337.95 1,224.58 1,227.70 901.17Corporate Dividend Tax 202.28 164.04 151.21 149.67 153.10Per share data (annualised)Earning Per Share (Rs) 44.73 36.10 33.76 37.37 34.59Equity Dividend (%) 140.00 120.00 110.00 110.00 100.00

Book Value (Rs) 478.31 463.01 444.94 417.64 270.37AppropriationsTransfer to Statutory Reserves 1,780.29 1,867.22 2,008.42 1,342.31 1,351.12Transfer to Other Reserves 0.26 1.04 0.01 0.01 0.00Proposed Dividend/Transfer to Govt 1,814.86 1,501.99 1,375.79 1,377.37 1,054.27Balance c/f to Balance Sheet 5,018.18 3,464.38 2,809.65 2,436.32 998.27Total 8,613.59 6,834.63 6,193.87 5,156.01 3,403.66

As we can see from the P&L account, the net income has not been increasing gradually over the years.The net income increased by 32% from Rs. 29,957.24 Cr. as on Mar 07 to Rs. 39,667.19 Cr. as on Mar08. However, there was a decrease in total income by 1.15% from March 08 to March 09 and further

by 15.84% to Rs. 32999.36 in M arch 10. There was a 0.25% increase in net income from March 10 toMarch 11 when the net income was 33,082.96.


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The major contribution of net income has come from operating income, figures of which have been-28,457.13, 39,467.92, 38,250.39, 32,747.36 and 32,369.69 from March 07 to March 11 respectively. The fluctuations in Total expenses have also shown a similar trend as the net income and the toalexpenses amounted to Rs. 27,931.58 Cr. in March 11.Net profit increased by 33.68% from Rs. 3,110.22Cr. as on March 07 to Rs. 4,157.73 Cr. as on March 08, but decreased by 10% to Rs. 3,758.13 Cr. as on

March 09. The net profit then increased by 7.1% to Rs. 4,024.98 Cr. on as on March 10 and by 27.99%to Rs. 5,151.38 Cr. as on March 11.

The total profit as on March 11 amounted to Rs. 8,613.59 Cr. with a profit of Rs. 3,464.38 Cr. broughtforward.The equity dividend has increased from 110% in March 09 to 120% in March 10 to 140% in March 11.

FINANCIAL HIGHLIGHTS

The financial performance for fiscal 2011 is summarized in the following table:

Rs. billion, except percentages Fiscal 2010 Fiscal 2011 % change

Net interest income andother income 155.92 156.65 0.5%

Provisions & contingencies1 43.87 22.87 (47.9)%

Profit before tax 53.45 67.61 26.5%

Profit after tax of the Bank 40.25 51.51 28.0%

1. Excludes provision for taxes.

Rs. billion, except percentages Fiscal 2010 Fiscal 2011 % change

Consolidated profit after tax 46.70 60.93 30.5%

Appropriations

The profit after tax of the Bank for fiscal 2011 is Rs. 51.51 billion after provisions and contingencies(excluding provision for taxes) of Rs. 22.87 billion and all expenses. The disposable profit is Rs. 86.15

billion, taking into account the balance of Rs. 34.64 billion brought forward from the previousyear.Directors have recommended a dividend at the rate of Rs. 14 per equity share of face value Rs. 10for the year and have appropriated the disposable profit as follows:


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Rs. billion Fiscal 2010 Fiscal 2011

To Statutory Reserve, making in allRs. 73.75 billion1 10.07 12.88

To Special Reserve created and maintainedin terms of Section 36(1) (viii) of 3.00 5.25the Income-tax Act, 1961, making in allRs. 31.69 billion

To Capital Reserve, making in allRs. 21.46 billion 4.44 0.83

To/(from) Investment Reserve, makingin all Nil 1.16 (1.16)

To General Reserve, making inall Rs. 49.80 billion 0.01 --

Dividend for the year (proposed)

- On equity shares @ Rs. 14 per share(@ Rs. 12 per share for fiscal 2010)2 13.38 16.15

- On preference shares (Rs.) 35,000 35,000

- Corporate dividend tax 1.64 2.02

Leaving balance to be carried forwardto the next year3 34.64 50.18

1. Includes Rs. 2.00 billion on amalgamation of The Bank of Rajasthan Limited with ICICI BankLimited.

2. Includes dividend for the prior year paid on shares issued after the balance sheet date and prior tothe record date.

3. After taking into account transfer to Reserve Fund Rs. 0.4 million for fiscal 2011, making in all Rs.11.3 million.


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PERFORMANCE OF ICICI BANK

IV. COMPARATIVE ANALYSIS

1. Operational and performance ratios

a) Net Interest Margin(NIM)

0.00

5,000.00

10,000.00

15,000.00

20,000.00

25,000.00

30,000.00

35,000.00

40,000.00

45,000.00


Total Income

Total Expenses

Net Profit for the Year

Total Profit

2.60%

4.40%

3.65%

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

ICICI HDFC AXIS

NIM

In Rs. Cr.

As soon as the effect of sublime crisis mitigatedhousing sector encounters a sudden improvement.HDFC as market leader in providing home loan wins

the race and discloses an increase of 4.40percent.Theanother interesting fact was AXIS bank displays adecent presence of 3.65percent followed by ICICI 2.60percent.


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c) Operating expenses to Net Income ratio

3. FINANCIAL RATIOS

a) Gross NPA Ratio

9.6

16.7

20.13

0

5

10

15

20

25

ICICI HDFC AXIS

ROE

50.82%

29.48% 24.15%

0.00%

20.00%

40.00%

60.00%

ICICI HDFC Axis

Operating expense to NetIncome Ratio

4.67%

1.05% 1.01%0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

ICICI HDFC AXIS

Gross NPA

ICICI has the highest operating expense indicating ahigh degree of inefficiency in its operations.However, it is primarily due to acquisition of Bank of Rajasthan and costs associated with the additional4000 employees and synergies in the merged

acquisition. The fact that operating expense to Netincome ratio was only 17.66 % for the financial year2010 further endorses the above argument.

NPA is the key strength indicator of the bank and isused as a measure of overall quality of the banksloan book. Generally, higher Gross NPA indicatesbad quality of loans because as the bank lends outstrongly to the customers, the chances of themdefaulting also rises.The graph shows that NPA ratio of HDFC and AxisBank is well below the regulated levels.The high Gross NPA ratio of ICICI is indicative of its aggressive nature. However, the GNPA hasreduced 5.23% in the FY10 which is insynchronization with the overall strategy of stabilizin the assets.

Return on equity is an excellent measure of

shareholder and customers trust .HDFC with theirtight money policy and premium marketsegmentation created a blank pace reimbursementwhich increases their market value quietsignificantly. On the other hand ICICI loses its sharebecause of over involvement in agri-loan which canbe counterproductive in high inflation time.


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c) Dividend Payout ratio

32.33%

19.55% 19.78%

0.00%

5.00%

10.00%

15.00%

20.00%

25.00%

30.00%

35.00%

ICICI HDFC Axis

Dividend Payout Ratio

ICICI has the highest Dividend Payout Ratio whichindicates general maturity of the organization.However, here it can also be attributed to the lowerEPS as compared to HDFC and Axis, whilecomparable Dividend per share.

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