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ICICI bank in the year 2009!

The bank had gone slow on its housing loans, mortgage loans and automobiles loans (both 2 wheelers and 4 wheelers). Most of the automobile showrooms did not have an ICICI bank representative throughout the year. ICICI bank was also the last among the major banks to reduce the housing loan interest rate to the competitive 8.5%. Most of the PSU banks lead by SBI were offering this rate since the beginning of the year 2009. The going slow on the lending has helped the bank to have a better portfolio of assets. This will help the bank in the years to come.

ICICI bank is the second largest bank in India. It offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. The bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. The bank’s UK subsidiary has established branches in Belgium and Germany.

ICICI bank’s equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).

Year 2009 for ICICI bank

ICICI bank has total assets of Rs. 366,374 crore at September, 2009 and profit after tax Rs. 1040 crore for the quarter ended September 30, 2009. This is a sequential increase of 18% from Rs. 878 crore for the quarter ended June 30, 2009. The branch network of the bank stood at 1,520 and about 4,816 ATMs in India and presence in 18 countries at October 26, 2009. The bank is in the process of implementing the 580 branch licenses received from Reserve bank of India which would expand the branch network to about 2,100 branches, giving the bank a wide distribution reach in the country.

Performance Summary

The Profit before tax for FY2009 was Rs. 5117 crores compared to Rs. 5056 crores for FY2008. Profit after tax for FY2009 was Rs. 3758 crores compared to Rs. 4158 crores for FY2008 due to the higher effective tax rate on account of lower proportion of income taxable as dividends and capital gains. The bank reported a growth in the treasury gains, though the core banking income was slightly below expectations.

Reduced Expenses

Operating expense is an ongoing cost for running a product, business. The objective of any organization is to minimize its operating cost at the same time gain market share. ICICI bank has succeeded in this aspect; the operating expenses (including direct marketing agency expenses) decreased 14% to Rs. 6835 crores in FY2009 from Rs. 7972 crores in FY2008.

Lending Activities

The main banking function is to accept deposits and lend money. Most of the aggressive loan sales departments of the bank were operating at lesser operating and manpower levels due to a strategic slow down policy. This has helped the bank to reduce the increase in the Non-Performing Assets (NPA).

The bank had gone slow on its housing loans, mortgage loans and automobiles loans (both 2 wheelers and 4 wheelers). Most of the automobile showrooms did not have an ICICI bank representative throughout the year. ICICI bank was also the last among the major banks to reduce the housing loan interest rate to the competitive 8.5%. Most of the PSU banks lead by SBI were offering this rate since the beginning of the year 2009.

The going slow on the lending has helped the bank to have a better portfolio of assets. This will help the bank in the years to come.

Deposit Base

ICICI has witnessed an increase in deposit base by Rs. 9283 crores in Q4-2009, of which Rs. 5286 crores was CASA (current a/c and savings a/c). CASA ratio is the ratio of the deposits in the form of Current Account & Savings Account to the total deposits. There was a substantial increase in CASA ratio of the bank to 28.7% at March 31, 2009 compared to 27.4% at December 31, 2008 and 26.1% at March 31, 2008

Net Interest Income

All firms can divide the balance sheet into assets and liabilities. For banks the assets are commercial and personal loans, mortgages, construction loans and securities. The liabilities are deposits from customers. The net interest income (NII) is then the difference between the revenues on the assets and the cost of servicing the liabilities. There was a 15% increase in net interest income of the bank from Rs. 7304 crores in FY2008 to Rs. 8367 crores in FY2009

Performance of Subsidiaries

ICICI Bank has a good portfolio of subsidiaries. Some of them have good revenue streams; others have a good market value which could be tapped strategically to make capital gains.

Insurance Subsidiaries

ICICI Prudential Life Insurance Company (ICICI Life) maintained its position as the largest private sector life insurer based on retail new business weighted received premium during the quarter year ended September 30, 2009. ICICI Life’s total premium in quarter was Rs. 3,634 crore. ICICI Life’s renewal premium upto September -2010 increased by 28% compared to 2009, reflecting the long term sustainability of the business. This company is yet to make any profit.

ICICI Lombard General Insurance Company (ICICI General) maintained its leadership in the private sector during the half year ended September 30, 2009. ICICI General’s premium in Q2-2010 was Rs. 801 crore. ICICI General’s profit after tax for Q2-2010 was Rs. 51 crore.

Securities and Asset Management

ICICI Prudential Asset Management Company’s profit after tax for Quarter ending Septemebr 2010 was Rs. 48 crore compared to Rs. 16 crore (US$ 3 million) in Q2-2009. ICICI Securities’ profit after tax for Q2-2010 was Rs. 38 crore (US$ 8 million) compared to Rs. 10 crore (US$ 2 million) in Q2-2009.

3i Info Systems

The holding of the bank in this software subsidiary was recently sold for a good price, yielding the bank about Rs.900 crores in cash. This benefit will be reflected in the quarterly report ending December 2009.

Summary

With the strategies of stringent cost control measures, maintaining strong capital adequacy, the bank will be well positioned for a better performance in FY 2010. By that time there are more possibilities for the macro environment to recover from the global slowdown, helping the bank further. It no wonder that ICICI bank has won The Asset Triple A Country Awards for Best Domestic Bank in India.

At the leadership position, Ms.Chanda Kochar is proving her mettle and has further enhanced the vision of the bank.

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