India & ICICI Group Trends & Outlook September 2015
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 US 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, along with these slides, 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 and Exchange Commission, and is available on our website www.icicibank.com 2
1 Macro-economic environment 2 Key trends & developments in the banking sector 3 ICICI Group: performance & strategy 3
1 Macro-economic environment 2 Key trends & developments in the banking sector 3 ICICI Group: performance & strategy 4
Trends in the Indian economy Strong external position Several policy measures Low inflation & declining interest rates Signs of improvement in economic activity 5
Trends in the Indian economy India s external position has improved CAD decreased to ~1.3% of GDP in FY2015 from a peak of 4.8% of GDP in FY2013 Strong FDI inflow of ~USD 9.5 billion in Q1-2016; inflow of USD 34.4 billion in FY2015 RBI s forex reserves at ~US$ 352 billion Import cover of about 9 months While global developments have implications for emerging market economies, India is relatively better placed 6
Jan-12 Jul-12 Jan-13 Jul-13 Jan-14 Jul-14 Jan-15 Jul-15 Jul-14 Aug-14 Sep-14 Oct-14 Nov-14 Dec-14 Jan-15 Feb-15 Mar-15 Apr-15 May-15 Jun-15 Jul-15 Trends in the Indian economy Significant improvement in inflation 8.00% 6.00% 4.00% 2.00% 0.00% CPI Core CPI CPI inflation decreased from 5.3% in Mar 2015 to 3.8% in July 2015 WPI negative since Nov 2014; at -ve 4.1% in July 2015 Easing monetary policy 9.00% 8.50% 8.00% 7.50% 7.00% 6.50% Repo rate Repo rate cut of 75 bps between Jan- August 2015 Banks have reduced deposit & lending rates 7
Government measures Several policy measures announced Investments Foreign investment in defence, railways and insurance Efforts to remove hurdles in infrastructure projects Auction of resources Fiscal policy Direct benefit transfer of subsidies Diesel price deregulated Taxation Commitment to a non-adversarial tax regime Long-term projects Make in India and Digital India 8
Q4-2014 Q1-2015 Q2-2015 Q3-2015 Q4-2015 Q1-2016 Trends in the Indian economy Signs of improvement across several key parameters 6.0% 4.0% 2.0% 0.0% -2.0% -4.0% 10.0% 0.0% Industrial production Jul 2014 Vehicle sales growth Jun 2015 Growth in industrial production, including manufacturing, has remained positive for eight consecutive months IIP growth of 3.2% in Q1-2016 Sales of passenger vehicles and commercial vehicles have improved Sales growth of 11.4% in passenger vehicles & 8.4% in commercial vehicles in July 2015-10.0% -20.0% -30.0% PV CV Gradual improvement in capital goods segment Pickup in coal production Step-up in government spending expected to support growth 9
In summary India better-placed given stronger external position, lower inflation, improved fiscal position and easing interest rates Several policy & administrative measures undertaken; improvement in growth indicators Continued focused execution of these measures would enable sustained higher growth 10
1 Macro-economic environment 2 Key trends & developments in the banking sector 3 ICICI Group: performance & strategy 11
Credit growth Robust growth in retail credit; low corporate credit offtake Non-food credit growth at 9.8% y-o-y at end-august 2015 Retail credit growth healthy at ~17.0% Corporate credit growth at 5-6% Including bonds & commercial papers, growth in total financing higher by around 2.0% Bank credit growth expected to improve gradually Retail credit growth expected to sustain Corporate credit growth would be driven by public sector capex and regular working capital demand Private sector capex still some time away 12
Deposit growth Deposit growth currently higher than loan growth Total deposits grew by 11.9% y-o-y at end-august 2015 Demand deposits grew by 13.2% Gradual recovery in financial savings Financial savings at 7.5% of GNDI 1 in FY2015 compared to 7.0% in FY2013 1. GNDI: gross national disposable income 13
Asset quality Retail credit quality stable Substantial improvement in credit infrastructure Established credit bureaus with extensive database Increased customer awareness Analytics used for credit decisions Corporate credit quality impacted by prolonged slowdown Impact Lower cash flows due to slowdown, delays in project implementation & raw material issues Higher leverage Actions Banks working with promoters to encourage sale of assets Joint lenders forums have resulted in increased co-operation among banks RBI has provided tools like strategic debt restructuring to expedite recoveries 14
Asset quality: way forward Government spending to drive growth recovery Focused resolution of infrastructure projects Continued focus on asset sales & deleveraging Close co-operation amongst banks Supportive regulatory & legal framework 15
The digital shift (1/2) Strong digital tailwinds in India World No. 1 World No. 2 World No. 1 ~32% increase in internet users in 2014 350 mn internet users ~40%-mobile only ~41% of e- commerce on mobile World No. 1 ~10% of WhatsApp users from India Among the fastest in the world Over 55% growth in smartphone usage Among the fastest in the world Among fastest growing markets for Twitter
The digital shift (2/2) continuing to transform banking Banking : then Banking : now
Evolving banking landscape Regulator encouraging innovation Payments: expanding infrastructure and number & types of players 11 payment bank licensees, 40 prepaid payment instrument issuer licensees, 10+ payment aggregators Entities with diverse sector experience & capabilities granted payment bank licenses Telecom companies, securities market entity, postal service, bottom of pyramid players, payment service providers, technology company and NBFCs 18
Imperatives for banks Constant innovation: rich functionality & high quality customer experience Focus on leveraging larger product suite & deeper customer relationships Explore mutually beneficial partnerships 19
Other developments Continued progress in implementation of global capital & liquidity standards Steps initiated for reform & capitalisation of public sector banks
1 Macro-economic environment 2 Key trends & developments in the banking sector 3 ICICI Group: performance & strategy 21
Significant progress on operating performance Strong retail & rural franchise Leadership in technology Substantial value creation within the ICICI Group 22
Significant progress on operating performance Strong retail & rural franchise Leadership in technology Substantial value creation within the ICICI Group 23
Performance over the years Significant improvement across operating parameters Funding profile Loan mix & growth Net interest margins Cost-income 24
Approach to asset quality Increasing share of retail loans Focus on lending to higher rated corporates Concentration risk management framework refined for incremental lending Close monitoring of existing exposures for resolution & recoveries Significant sequential decline in NPL additions in Q1-2016; no meaningful restructuring pipeline 25
Performance over the years Return ratios have improved About 90 bps improvement in Standalone RoA over FY2009 Consolidated RoE improved from less than 8% in FY2009 to 15.0% in Q1-2016 Strong capital position to support future growth 26
Significant progress on operating performance Strong retail & rural franchise Leadership in technology Substantial value creation within the ICICI Group 27
Enhanced retail franchise Sustained growth in granular deposits Robust loan portfolio growth Healthy growth in fee income Stable asset quality trends The Bank continues to scale up its retail business and invest in strengthening the franchise and distribution infrastructure 28
Extensive geographical presence Significant investments made in distribution Branch network ~52% of branches in semiurban and rural areas Supplemented by ~12,800 ATMs 29
Focus on rural business (1/2) Significant presence in rural & semi-urban markets Network Branches Gramin branches BCs 1 & CSPs 2 Partner linkages Technology solutions Aadhaar integration for DBT 1 Mobile based remittance services Bank on wheels & micro ATMs Approach to lending Selective geographical approach Collateral based lending Granular portfolio 2,106 branches in rural & semi-urban markets 1. BCs: Business correspondents 2. CSPs: Customer service points 30
Focus on rural business (2/2) Diverse product suite & granular lending Key products include loans against gold jewelry, farm equipment loans, kisan credit card, agri term loans and loans to Self Help Groups (SHG) Portfolio contributes~15% to retail loans ~33% y-o-y growth at June 30, 2015 Continue to focus on growth while monitoring risks 31
Significant progress on operating performance Strong retail & rural franchise Leadership in technology Substantial value creation within the ICICI Group 32
Leadership in technology Digitizing channels Digitizing experience Digitizing core Leveraging digitization & mobility to strengthen franchise & improve performance 33
Digitizing channels (1/2) Over 60% of total transactions by savings account customers through new age digital channels imobile Integrated view of all ICICI Bank relationships Over 100 services available First in India: tagging frequent transactions as favourites; in-app chat functionality; alerts & notifications through Google Now ; flexible recurring deposits called iwish Refreshed & intuitive website One of the largest bouquets of seamless services Online dashboard - My View Investment management & tax services tools Internet banking contributes to ~48% in number & ~38% in value of incremental retail term deposits 34
Digitizing channels (2/2) Innovative offerings to improve customer convenience First digital bank in India: over 1 million downloads in four Comprehensive digital wallet months Significant interest from non-icici users Services available include shopping, bill payments, booking movie tickets Linked prepaid card for POS transactions at more than 1 million merchants Presence on social media Banking services available on Facebook and Twitter Fan base of over 3.9 million on Facebook Highest among banks in India 35
Digitizing experience (1/2) First bank in India to launch 24x7 fully automated branches 101 Touch Banking branches across 33 cities in India Over 1,000 self service kiosks at other branches Smart Vault: first-of-its-kind 24x7 locker facility State of the art robotic technology Hi-tech security system & multilevel checks Example of Make in India : ~80% Indian components 36
Digitizing experience (2/2) Contactless payments Debit & credit cards using near field communication Toll and transit solutions Transit Metro solutions Debit & credit cards with NFC metro smart card chip Auto-top up facility Easy recharge using SMS/internet Solutions for road transport Prepaid card with dual wallet (RFID 1 chip & magnetic chip) Single card for bus ticket payments & retail purchases Electronic toll collection: prepaid RFID 1 tags for vehicles 1. RFID: Radio-frequency identification 37
Digitizing core Front office ~70% of savings accounts opened using tablets KYC through scanned documents Demo videos for products & services Upsell of mutual funds & insurance Being introduced for loan products Mid office Branch services shifting to customers mobiles Video banking app 24X7 face-to-face banking Insta-banking Pre-processing of transactions EFT cheques App-based cheque issuance & image based cheque processing Back office Digitizing operations Image-based processing of documents OCR 1 to reduce data entry & error rates Automated processing 1. OCR: Optical Character Recognition 38
Significant progress on operating performance Strong retail & rural franchise Leadership in technology Substantial value creation within the ICICI Group 39
ICICI Group Savings Protection Investments Capital Flows Credit Spanning the spectrum of financial services 40
Life insurance Strong growth & improvement in market share Growth in AUM Sustained & strong profitability Overall market share 1 has improved from 7.2% in FY2014 to 11.3% in FY2015 and 11.7% in Q1-2016 38.9% y-o-y growth in new business premiums 1 in Q1-2016 compared to 1.5% y-o-y decrease for industry ~15% y-o-y increase in AUM; at ~` 991 billion at June 30, 2015 PAT of ` 3.97 billion in Q1-2016; ` 16.34 billion in FY2015 Return on equity of over 30% 1. Based on retail weighted received premium 41
General insurance Market position Strong profitability Private sector market leadership maintained Overall market share at 8.9% 1 in Q1-2016 Gross written premium grew by 14.9% y- o-y compared to about 13% y-o-y growth for industry ~61% y-o-y increase in PAT to `1.16 billion in Q1-2016; PAT of ` 5.36 billion in FY2015 Return on equity at ~20% 1. Based on gross written premium 42
Other businesses Strong franchise across segments Asset management 2nd largest AMC in India ~31% y-o-y increase in profits in Q1-2016 Securities & primary dealership Strong platforms for leveraging favourable markets ICICI Securities: ~3.5 million customers ICICI Securities PD: amongst the leaders in Indian fixed income & money markets Investments in a range of areas including digital product offerings and partnerships 43
Looking ahead 44
Key priorities going forward Continue to expand retail & rural franchise Maintain technology leadership Sustain operating efficiency Targeting 17-18% consolidated RoE Selectively grow corporate portfolio Leverage strong capital position & improve efficiency Focus on profitability of subsidiaries & return on capital 45
Thank you 46