ICICI Group: Strategy & Performance February 2010
Certain statements in these slides are forward-looking statements. These statements are based on management's current expectations and are subject to uncertainty and changes in circumstances. Actual results may differ materially from those included in these statements due to a variety of factors. More information about these factors is contained in ICICI Bank's filings with the Securities and Exchange Commission. All financial and other information in these slides, other than financial and other information for specific subsidiaries where specifically mentioned, is on an unconsolidated basis for ICICI Bank Limited only unless specifically stated to be on a consolidated basis for ICICI Bank Limited and its subsidiaries. Please also refer to the statement of unconsolidated, consolidated and segmental results required by Indian regulations that has been filed with the stock exchanges in India where ICICI Bank s equity shares are listed and with the New York Stock Exchange and the US Securities Exchange Commission, and is available on our website www.icicibank.com. 2
Agenda Market developments Strategy & execution Financial performance 3
Key economic indicators Q2-2010 GDP growth at 7.9% compared to 6.1% in Q1-2010 Industrial production grew 11.7% in November, average growth of 10.4% in August-November Strong capacity utilization in key sectors like steel, aluminium and cement Increased momentum in home, car and commercial vehicle sales Strong fundamentals driven by domestic demand 4
Liquidity, interest rates & credit growth Comfortable systemic liquidity: About Rs. 1.0 trillion lent to RBI on a daily basis Increase in CRR by 75 bps will reduce systemic liquidity by about Rs. 360 billion 10 year G sec yields increased by about 45 bps in Q3-2010 WPI inflation increased to 7.3% for December Inflation figures continue to be impacted by base effect and high food prices RBI s projection at 8.5% by end March 2010 Non-food credit growth muted at 14.4% on Jan 15 RBI s revised projection at 16% for FY2010 5
Agenda Market developments Strategy & execution Financial performance 6
Strategy for FY2010 CASA Increase the proportion of low cost CASA deposits Reduce the proportion of wholesale deposits Position balance sheet for next phase of growth Capital Maintain high capital adequacy Cost Keep stringent control on operating expenses Credit Focus on select credit opportunities and reduce unsecured retail portfolio 7
Progress in execution of strategy Substantial progress in achievement of near term targets Robust growth in CASA deposits Reduction in operating expenses Sharp reduction in retail NPL formation Increase in net interest margin to 2.6% Well capitalized for a period of sustained growth 8
Focus on CASA deposits Savings deposits (Rs. bn) 550 500 450 400 350 300 250 200 150 100 50 - CAGR 47% Mar- 03 Mar- 04 Mar- 05 Mar- 06 Mar- 07 Mar- 08 Mar- 09 Dec- 09 Mar 2003 Mar 2004 Mar 2005 Mar 2006 Mar 2007 Mar 2008 Mar Dec CASA ratio 15.5% 23.0% 24.3% 22.7% 21.8% 26.1% 28.7% 39.6% Branches 446 469 562 614 755 1,262 1,419 1,626 Target to reach about 2,000 branches by April 2010 9
High capitalisation levels 20.0% 19.4% 18.3% 16.8% Capital adequacy ratio 15.0% 10.0% 5.0% 14.6% 14.4% 14.3% 13.8% 13.6% 13.5% 11.5% 0.0% ICICI Bank Other top 9 Indian banks Tier-1 Tier-2 As per the latest available financials (December 30, ) 10
Stringent cost control Cost/average assets 2.7% 2.5% 2.3% 2.1% 1.9% 1.7% 1.5% 2.5% 2.3% 2.3% 2.4% 2.2% 1.8% 1.6% FY2004 FY2005 FY2006 FY2007 FY2008 FY 9M-2010 Rs. bn FY2004 FY2005 FY2006 FY2007 FY2008 FY 9M- 2010 Operating expenses 1 25.98 33.71 47.25 65.02 79.72 68.35 42.14 1. Including DMA 11
Domestic credit strategy Enhanced focus on growth going forward Participate in consumption growth through mortgages, and vehicle loans Capitalise on growing infrastructure and corporate project pipeline Increase market share in commercial banking Further reduce the proportion of unsecured personal loans and credit cards 12
Strategy for international business Retail business Focus on the needs of non-resident Indians Remittances into India Savings & Investment products Funding franchise Lending & trade Build a stable & diversified funding base Develop retail deposit franchise by leveraging low cost technology Tap long term sources of funding like bonds and syndicated loans to diversify funding Lending to Indian corporates Leverage domestic relationships Trade finance Including select non-india exposures linked to imports to India 13
Non-banking subsidiaries strategy ICICI Life ICICI General ICICI AMC ICICI Securities Focus on consolidating position as the largest private sector life insurer, while maintaining new business profit margins and cost efficiencies Focus on maintaining leadership, while improving underwriting profitability Maintain market position among the top three mutual funds Capitalize on retail broking platform and market opportunities to increase revenues and profitability 14
Agenda Market developments Strategy & execution Financial performance 15
Overview: Q3-2010 6% increase in standalone profit after tax to Rs. 11.01 billion in Q3-2010 from Rs. 10.40 billion in Q2-2010 Standalone profit after tax lower compared to Rs. 12.72 billion in Q3- due to absence of treasury income in Q3-2010 compared to treasury income of Rs. 9.76 billion in Q3- Standalone profit after tax of Rs. 30.19 billion in 9M- 2010 compared to Rs. 30.14 billion in 9M- Consolidated profit after tax increased by 18% to Rs. 33.28 billion in 9M-2010 from Rs. 28.29 billion in 9M- 16
Continued improvement in operating trends Net interest income increased to Rs. 20.58 billion in Q3-2010 from Rs. 19.90 billion in Q3- and Rs. 20.36 billion in Q2-2010 Net interest margin increased from 2.4% in Q3- and 2.5% in Q2-2010 to 2.6% in Q3-2010 Fee income increased to Rs. 14.22 billion in Q3-2010 from Rs. 13.47 billion in Q3- and Rs. 13.87 billion in Q2-2010 17
Continued improvement in operating trends Continued reduction in operating expenses 20% year-on-year and 3% sequential decrease in operating & DMA expenses to Rs. 13.42 billion in Q3-2010 from Rs. 16.80 billion in Q3- and Rs. 13.79 billion in Q2-2010 Cost/average asset ratio for Q3-2010 at 1.5% compared to 1.8% for Q3- Total provisions decreased sequentially to Rs. 10.02 billion in Q3-2010 from Rs. 10.71 billion in Q2-2010 18
Balance sheet highlights CASA ratio of 39.6% at December 31, compared to 27.4% at December 31, 2008 and 36.9% at September 30, Increase of about Rs. 100.00 billion in savings deposits during April-December Year-on-year CASA deposits growth of 36.4% Net NPA ratio of 2.19% at December 31, ; at the same level as September 30, 19
Rural 7% Composition of loan book: December 31, Overseas branches 26% 2 Retail business group 45% Other secured 2% Personal loans 7% Vehicle loans 25% 1 Credit cards 6% Home 60% Domestic corporate 18% SME 4% Total loan book: Rs. 1,793 bn Total retail loan book: Rs. 807 bn 1. Vehicle loans includes auto loans 10%, commercial business 14% and two wheelers 1% 2. Retail business group includes builder loans and dealer funding of Rs. 36.76 bn 20
Key ratios (Percent) FY Q3- Q2-2010 Q3-2010 Return on average net worth 1, 2 7.7 10.2 8.1 8.4 Weighted avg EPS (Rs.) 2 33.8 45.3 37.1 39.2 Book value (Rs.) 445 449 460 469 Net Interest Margin 2 2.4 2.4 2.5 2.6 Fee/income 41.4 30.3 36.4 38.3 Cost/income (incl. DMA) 43.4 37.7 36.1 36.2 Cost/average assets (incl. DMA) 2 27.4% 1.8 1.8 1.5 1.5 CASA ratio 28.7% 36.9% 39.6% 1. Based on quarterly average net worth. 2. Annualised for all interim periods 21
Asset quality and provisioning (Rs. in billion) Mar 31, Jun 30, Sep 30, Dec 31, Gross NPAs 99.29 96.95 94.71 90.70 Less: Cumulative provisions 53.10 50.28 49.13 46.54 Net NPAs 46.19 46.67 45.58 44.16 Net NPA ratio 1.96% 2.19% 2.19% 2.19% Outstanding general provision on standard assets 14.36 Gross retail NPLs at Rs. 59.75 bn and net retail NPLs at Rs. 27.78 bn at December 31, 51% of net retail NPLs are from unsecured products Net restructured loans of Rs. 53.38 bn at December 31, 22
23 Thank you
24 Annexure
25 Unconsolidated financials
Profit & loss statement (Rs. in billion) FY Q3-9M- Q2-2010 Q3-2010 9M- 2010 Q3-o- Q3 Growth NII 83.67 19.90 62.28 20.36 20.58 60.79 3.4% Non-interest income 76.03 25.15 59.30 18.24 16.73 55.87 (33.5)% - Fee income 65.24 13.47 51.81 13.87 14.22 41.28 5.6% - Lease and other income 6.36 1.92 5.20 1.40 2.77 1 4.74 1 44.3% - Treasury income 4.43 9.76 2.29 2.97 (0.26) 9.85 - Total income 159.70 45.05 121.58 38.60 37.31 116.66 (17.2)% Operating expenses 63.06 15.77 47.54 13.58 13.11 41.34 (16.9)% DMA expenses 5.29 1.03 4.76 0.21 0.31 0.80 (69.9)% Lease depreciation 2.10 0.54 1.58 0.46 0.20 1.19 (63.0)% Operating profit 89.25 27.71 67.70 24.35 23.69 73.33 (14.5)% 26 1. Includes profit of Rs. 2.03 billion related to transfer of merchant acquiring operations to new entity 81% owned by First Data.
Profit & loss statement (Rs. in billion) FY Q3-9M- Q2-2010 Q3-2010 9M- 2010 Q3-o- Q3 growth Operating profit 89.25 27.71 67.70 24.35 23.69 73.33 (14.5)% Provisions 38.08 10.08 27.24 10.71 10.02 33.97 (0.6)% Profit before tax 51.17 17.63 40.46 13.64 13.67 39.36 (22.5)% Tax 13.59 4.91 10.32 3.24 2.66 9.17 (45.8)% Profit after tax 37.58 12.72 30.14 10.40 11.01 30.19 (13.4)% 27
Balance sheet: Assets Dec 31, 2008 Mar 31, Sep 30, Dec 31, (Rs. in billion) Y-o-Y growth Cash & bank balances 270.83 299.66 292.67 305.78 12.9% Investments 1,065.38 1,030.58 1,199.65 1,234.09 15.8% -SLR investments 684.84 633.87 778.34 752.62 9.9% - Equity investment in subsidiaries 111.02 120.97 121.00 121.00 9.0% Advances 2,125.21 2,183.11 1,908.60 1,792.69 (15.6)% Fixed & other assets 282.68 279.66 262.82 229.72 (18.7)% Total assets 3,744.10 3,793.01 3,663.74 3,562.28 (4.9)% 1. Investment in security receipts of asset reconstruction companies at December 31, was Rs. 35.45 bn. Credit derivative exposure (including off balance sheet exposure) of Rs. 51.88 bn at December 31, (underlying comprises Indian corporate credits). Including impact of exchange rate movement 28
Equity investment in subsidiaries ICICI Prudential Life Insurance Dec 31, 2008 35.90 (Rs. in billion) Mar 31, 35.90 Dec 31, 35.93 ICICI Bank Canada 23.70 33.50 33.50 ICICI Bank UK 23.25 23.25 23.25 ICICI Home Finance 10.97 11.12 11.12 ICICI Lombard General Insurance 10.96 10.96 10.96 ICICI Bank Eurasia 3.00 3.00 3.00 ICICI Securities Primary Dealership 1.58 1.58 1.58 ICICI Securities Limited 0.87 0.87 0.87 ICICI AMC 0.61 0.61 0.61 ICICI Venture Funds Mgmt 0.05 0.05 0.05 Others 0.14 0.14 0.14 Total 111.02 120.97 121.00 29
Balance sheet: Liabilities Net worth - Equity capital -Reserves Preference capital Deposits -Savings - Current Borrowings Other liabilities Total liabilities Dec 31, 2008 500.35 11.13 489.22 3.50 2,090.65 385.72 188.10 990.69 158.91 3,744.10 Mar 31, 495.33 11.13 484.20 3.50 2,183.48 410.36 216.32 928.05 182.65 3,793.01 Sep 30, 512.58 11.14 501.44 3.50 1,978.32 493.18 236.12 997.73 171.61 3,663.74 (Rs. in billion) Dec 31, 522.40 11.14 511.26 3.50 1,976.53 510.54 271.93 914.79 145.06 3,562.28 Y-o-Y growth 4.4% 0.1% 4.5% - (5.5)% 32.4% 44.6% (7.7)% (8.7)% (4.9)% Credit/deposit ratio of 71% on the domestic balance sheet at December 31, Figures include impact of exchange rate movement 30
Composition of borrowings Domestic - Capital instruments - Other borrowings Overseas - Capital instruments - Other borrowings Total borrowings Dec 31, 2008 426.34 225.46 200.88 564.35 16.48 547.87 990.69 Sep 30, 493.63 259.21 234.42 504.10 16.28 487.82 997.73 (Rs. in billion) Dec 31, 411.54 267.74 143.80 503.25 15.75 487.50 914.79 Capital instruments constitute 65% of domestic borrowings Figures include impact of exchange rate movement 31
Capital adequacy (Basel II) Rs. billion except % Mar 31, Sep 30, Dec 31, Total Capital 553.55 15.5% 573.09 17.7% 597.74 19.4% -Tier I 421.96 11.8% 431.42 13.3% 438.44 14.2% -Tier II 131.59 3.7% 141.67 4.4% 159.30 5.2% Total RWA 3,564.63 3,240.32 3,081.51 - On balance sheet 2,758.15 2,501.21 2,363.77 - Off balance sheet 806.48 739.11 717.74 32
33 Overseas subsidiaries
Bonds/notes of financial institutions 25% 34 2 ICICI Bank UK asset profile 4 India linked investments 6% Asset backed securities 2% Other assets & investments 4% ` Cash & liquid securities 11% 3 Loans & advances 52% Total assets: USD 7.5 billion 1. Includes cash & advances to banks and certificates of deposit 2. Includes US$ 169 mn of India-linked credit derivatives 3. Includes securities reclassified to loans & advances in FY 4. Does not include US$ 156 mn of ABS reclassified as loans & receivable in FY 1 Net profit of USD 7.3 million in Q3-2010 Capital adequacy ratio at 17.0% Net MTM write-back of USD 14.1 million (post-tax) in reserves in Q3-2010
ICICI Bank UK liability profile Syndicated loans & interbank borrowings 10% Other liabilities 4% Net worth 8% Long term Debt 15% ` Demand deposits 22% Total liabilities: USD 7.5 billion Term deposits 41% Proportion of retail term deposits in total deposits at 64% at December 31, 35
ICICI Bank Canada asset profile Asset backed securities Other assets & investments 6% 1 Cash & liquid securities 13% 2% India linked investments 3% ` 2 Federally insured mortgage 15% Net profit of CAD 4.8 million in Q3-2010 Capital adequacy ratio at 23.5% Loans to customers 61% 36 Total assets: CAD 5.8 billion 1. Includes cash & advances to banks, government securities and banker s acceptances/depository notes 2. Includes CAD 132 mn of India-linked credit derivatives
ICICI Bank Canada liability profile Net worth 17% Other liabilities 1% Term deposits Borrowings 67% 1% ` Total liabilities: CAD 5.8 billion Demand deposits 14% ICICI Bank Canada balance sheet funded largely out of retail term deposits 37
1 Cash & liquid securities 24% ICICI Bank Eurasia Retail loans 15% Other assets & investments 3% Loans to corporates & banks 54% Total borrowings of USD 344 million at December 31, Capital adequacy of 19.8% at December 31, Financial breakeven in 9M-2010 Corporate bonds 4% Total assets: USD 459 million 1. Includes cash, balances with central bank, nostro balances, govt bonds & placements with banks 38
39 Domestic subsidiaries
ICICI Home Finance Fixed & other assets 2% Investments 10% Shareholders funds 9% Deposits 27% Loans 88% Borrowings 64% 40 Total assets/liabilities: Rs. 138 billion Net profit of Rs. 0.44 billion in Q3-2010 compared to Rs. 0.28 billion in Q2-2010 Capital adequacy ratio of 13.9% at December 31, Net NPA ratio: 1.3%
ICICI Life APE Renewal premium Total premium New Business Profit (NBP) NBP margin Statutory Profit/(Loss) Assets Under Management Expense ratio (Rs. in billion) Q3- Q3-2010 10.02 14.95 20.04 24.11 31.73 40.31 1.90 2.82 19.0% 18.9% (1.35) 0.07 284.45 536.19 12.0% 8.3% Continued market leadership in private sector 1 Statutory loss of Rs. 0.98 billion in 9M-2010 41 1. During April - December on new business retail weighted received premium basis.
ICICI General Gross premium 1 PBT PAT (Rs. in billion) Q3- Q3-2010 7.97 8.33 0.01 0.45-0.43 Continued market leadership in private sector 2 1. Excluding remittances from third party motor pool 2. During April - December 42
Other subsidiaries Profit after tax ICICI Securities Ltd. ICICI Securities PD ICICI Venture ICICI Prudential Asset Management Company Q3- - 3.02 0.04 (0.14) (Rs. billion) Q3-2010 0.37 0.16 0.09 0.40 43