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Performance ReviewMay 3, 2002
AgendaICICI Bank today Retail banking Corporate banking & structured finance Merger process Financial performance
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ICICI Bank today
Large capital base Vast talent pool Low operating costs Technology focus Strong corporate relationshipsIndias largest private sector bank and one stop financial solutions provider with a diversified and de-risked business model
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ICICI Bank today (contd.)
Diversified portfolioMarch 2001- Proforma merged March 2002- Merged5% 7% 23%
33%
Pro ject finance Co rp o rate finance Retail finance
12% 4% 12% 3% 36%
Reserves & cash Investments Other assets34% 8% 23%
Rs. 931.50 billion
Rs. 1,041.10 billion
the asset composition change on account of statutory requirements and increase in retail assets is contributing to de-risking the portfolio4
ICICI Bank today (contd.)
De-risked portfolioCapital adequacy ratio of 11.44% Net NPA ratio of 4.7% Fair valuation adjustment of Rs. 37.80 billion
(Rs. in billion)
Gross book Existing Fair value Total Coverage value provision provision provision Non-performing 69.18 34.66 9.02 43.68 63.1% loans Other loans 476.36 2.19 19.53 21.72 4.5% Mark-to-market of investments 9.25 Total fair valuation adjustment 37.80
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ICICI Bank today (contd.)ICICI Bank is well positioned to redefine the banking model by focussing on the untapped potential in the profitable retail business segments and leveraging its superior delivery capabilities and lower operating costs in the underserved corporate banking business
Retail banking
Corporate banking
Structured finance
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Benchmarking (contd.)Consumer loans / Total loans58.0% 36.0% 26.0% 8.0% 13.0%1.0% 9.0%USA - 51%
Mortgages / GDP
37.0%
13.0%
17.0%
India Thailand India Thailand
Malaysia Taiw an Taiwan M alaysia
Korea Korea
India India
Thailand Thailand
Korea M alaysia Taiw an Korea Malaysia Taiwan
Credit cards / Population121.9%USA - 235%
Other retail loans / GDP41.0%
82.4%
USA - 24%16.0% 17.0% 8.0% 0.8%
0.4%
2.8%
9.8%
India India
Thailand Thailand
Malaysia Taiwan M alaysia Taiw an
Korea Korea
In dia India
Thailand Taiw an Thailand Taiwan
M alaysia Malaysia
Kor ea Korea
Source: Salomon Smith Barney
Indias retail market is at a nascent stage and is expected to grow rapidly on account of the current trend in upward migration of household income levels7
Household segment migrationNo. of households (million)CAGR 48%6.8 22.9
~
2.1
1996 Rich (> Rs. 0.5 mn p.a.) Mass (Rs. 0.1-0.3 mn p.a.)
1999
2002
Mass affluent (Rs. 0.3-0.5 mn p.a.)
Source: 1996, 1999 data is from NCAER study for top 24 cities, 2002 data is estimated by ICICI Bank 8
ICICI Banks strategy to capture retail potentialStrong corporate relationships
Achieving leadership in retail financial services
Brand
Technology
the core of this strategy is our relentless focus on the customer and crossselling of products9
Operational excellence
Catalyzing cross-sell
Internet Banking
Call Centers
500 Outlets
1005 ATMs
Customized cross-selling by leveraging relationships, brand and technology
Fixed deposits Power Pay
Bonds Consumer loans
Life insurance Auto & home loans
Health insurance Credit & debit cards
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Operational excellencePrudent credit policies
Bolstered by a company wide 6 sigma initiative
Adequate fraud control
Rigorous collection mechanism
These measures have ensured that we have followed a cautious approach while maintaining high growth rates and profitability in all segments11
Our growth in retail (contd.)80 70 60 50 40 30 20 10 Outstanding loansGrowth rate 167% 79.86
Home loans grew at
5 1 .3 430.73
2 2 .1 25.15
8 .6 1
2 8 .5 2
230% in FY 2002 Amongst the leading providers of home loans in India Other retail loans grew at 130% in FY 2002
(Rs. in billion)
2000 2001 2002 H o m e lo ans Other retail lo ans
Home & others
Bank accounts
Credit cards
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Our growth in retail (contd.)Int e rn e t ba nk ing c us t o m e r s B a nk c us t o m e r a c c o unt s
5 4 3 2 10 .3 0 .1
5 .0
Bank accounts grew
(million)
3 .2
at 53% in FY 2002 Internet customer accounts grew at 100% in FY 2002 Comprised 25% of
bank accounts1 .2 0 .6 0 .6
Among top twelve
1999 2000 2001 2002
internet banks in the world
Home & others
Bank accounts
Credit cards5.0
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Our growth in retail (contd.)N um be r of cre dit cards
0. 8Growth rate 100%
0.6
(million)
0. 50.3
0. 3
2000 2001 2002
Home & others
Bank accounts
Credit cards
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In summaryMortgages
Other retail loans
Credit cards
Nascent ICICI Bank analysis -
Developing
Matured
Commoditized
For mortgages & other retail loans: Nascent 30% of GDP. For credit cards: Nascent 50% penetration
We entered the retail market at the beginning of the growth stage and are now harnessing the untapped potential in all the profitable business segments
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Corporate banking and structured finance Maximize
value of client relationships technology to
Leverage
enhance
delivery
Strategy
capabilities Proactive
portfolio management
For efficient capital utilisation and lower balance sheet exposure
The aim is to provide state-of-the-art, low cost and efficient banking services, with a focus on increasing fee-based income Corporate Banking Structured Finance
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Corporate banking and structured finance Grow
market share in fee-based products and services4% 51%Corporate Retail
Fee market size
13%
Government Forex Overseas branches
14% 18%
Market size: Rs. 111.10 billion
Corporate Banking
Structured Finance
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Corporate banking and structured finance Corporate
Solutions Group
Reach the entire universe of current and potential clients (over 1300) and offer tailor-made solutions
Government
Solutions Group
Strategy
Develop comprehensive banking relationships with all central, state and local governmental entities
Small
& Medium Enterprises Group
Develop comprehensive banking relationships with small & medium sized enterprises leveraging corporate linkages Focus on agri-lending to help in compliance with priority sector norms
Corporate Banking
Structured Finance
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Corporate banking and structured finance Leverage
Strategy
expertise to facilitate loan origination and ensure sell down leading to Reduced concentration of risk Optimal risk-return trade-off pursue cross-sell opportunities for all ICICI group products
Aggressively
Significant opportunities for funding well-structured projects with in-built risk mitigation Corporate Banking Structured Finance
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Corporate banking and structured finance Infrastructure
Projects Group
Create a balanced portfolio across sub-sectorsTelecom, Power, Transportation, Urban Infrastructure
Strategy
Focus on non-fund based activities
Manufacturing
Projects Group
Consolidation and modernization in core sectorsCement, Steel, Textiles, Chemicals Oil & gas, Mining, Retail, Agri infrastructure
Structured opportunities in certain emerging sectors
Corporate Banking
Structured Finance
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Merger process
Obtaining
Challenges
regulatory approvals within a short timeperiod of 6 months with SLR & CRR requirements with directed lending norms
Compliance Compliance
Stipulated at 50% on residual net bank credit
Regulatory
Fair valuation of loans Merger accounting
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Merger process All
regulatory approvals obtained compliance with SLR & CRR requirements
Compliance status
Full
Raised Rs. 180.00 billion in 5 monthsWithout distortion of yield curve With minimal asset-liability mismatch
Directed
lending norms
Home loans of less than Rs. 1.0 million qualify for priority sector lending Innovative approach to agri-financing to meet priority sector objectives while mitigating credit risks Regulatory Fair valuation of loans Merger accounting
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Merger process Fair
valuation of loans done by Deloitte Haskins & SellsComprehensive review of credit rating methodology Robust approach to evaluation Examination
Valuation
of loan files and review of collateral Analysis of projections and restructuring schemes (if any) to estimate future cashflows
Discounted value of cashflows on the loan calculated to estimate the fair value Provisioning requirement ascertained by above process extrapolated to the balance portfolio
Equity
& related investment portfolio marked to
marketRegulatory Fair valuation of loans Merger accounting
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Merger processfor the merger under purchase method Fair valuation reflected through additional provisions Accounting
Best practices
Partly in ICICIs accounts prior to the Appointed Date Balance adjusted against ICICIs reserves transferred to ICICI Bank on the Appointed Date
Leading
to a Gross book Existing Fair value de-risked portfolio2.19
(Rs. in billion)
Non-performing loans Other loans 476.36 Mark-to-market of investments Total fair valuation adjustment
Total Coverage value provision provision provision 69.18 34.66 9.02 43.68 63.1% 19.53 9.25 37.80 21.72 4.5%
4.5% cover against the total performing portfolio Regulatory Fair valuation of loans Merger accounting
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Profit & loss statement1(Rs. in billion)
Interest income
Q4FY01 3.69 2.44 1.25 1.00 0.61 0.39 1.22 1.03 0.53 0.50
Q4FY02 6.77 5.33 1.44 1.77 0.99 0.78 1.84 1.37 0.80 0.57
FY01 12.42 8.38 4.04 2.20 1.71 0.49 3.34 2.90 1.29 1.61
FY02 21.52 15.59 5.93 5.75 2.83 2.92 6.23 5.45 2.87 2.58
Inc % 73.3 86.0 46.8 161.4 65.5 495.9 86.5 87.9 122.5 60.2
ICICI Bank25
Interest expense Net interest income Non-interest income - Core fee income - Trading gains Operating expenses Operating profit Prov. & contingencies Profit after tax
1. Includes operations of ICICI, ICICI PFS and ICICI Caps from the Appointed Date i.e., Mar 30, 2002.
Balance sheet: Assets(Rs. in billion)
FY01 Cash, balances with banks & SLR - Cash & balances with RBI & banks - SLR investments Advances Debentures & bonds Other investments Fixed assets Other assets Total assets
FY02 Standalone 77.06 286.14 35.94 41.12 70.31 30.70 10.05 3.84 5.40 86.48 199.66 48.32 28.25 4.62 4.35 10.06 381.74
FY02 Merged 357.64 129.71 227.93 470.35 75.41 55.58 42.39 39.73 1,041.10
ICICI Bank
197.36
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Balance sheet: Liabilities(Rs. in billion)
FY01 Net worth - Equity capital
FY02 Standalone 13.13 15.45 2.20 10.93 2.20 13.25 325.13 24.97 29.57 270.59 28.90 3.95 12.26 381.74
FY02 Merged 62.49 6.13 56.36 3.50 320.85 24.97 27.36 268.52 589.70 97.51 64.56 1,041.10
ICICI Bank
- Reserves Preference capital Deposits - Savings deposits - Current deposits - Term deposits Borrowings Of which: Sub-debt Other liabilities Total liabilities
163.78 18.81 26.22 118.75 12.00 1.68 8.45 197.36
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US GAAP: Income statement(Rs. in billion)
FY01 Interest revenue Interest expense 12.41 8.41 4.00 1.08 1.75 3.10 1.57 0.26 1.31
FY02 20.84 15.12 5.72 1.72 5.21 6.26 2.95 0.91 2.04
Inc. % 67.9 79.8 43.0 59.3 197.7 101.9 87.9 265.4 55.7
ICICI Bank28
NII Provision for credit losses Non-interest revenue Non-interest expense Income before tax Income tax & others Net income
US GAAP: Net income reconciliation(Rs. in billion)
FY2001 As per Indian GAAP Profit of ICICI, ICICI Capital & ICICI PFS for two days included under Indian GAAP Deferred taxation Provision for credit losses MTM on trading & AFS portfolio Premium & processing fee amortisation Business combination in respect of Bank of Madura merger Others Total adjustments as per US GAAP As per US GAAP 1.61 0.44 (0.40) (0.41) (0.10) 0.16 (0.30) 1.31
FY2002 2.58 (0.08) 0.21 0.10 (0.05) (0.34) (0.17) (0.21) (0.54) 2.04
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ICICI Bank
In conclusion
Having complied with all regulatory requirements, the merged entity, with an established brand and strong technology focus, is now well placed to harness the vast retail potential and consolidate its position in corporate banking to emerge as the leading financial solutions provider in India
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