ICICI Bank : Whether to Buy?

Industrial Credit and Investment Corporation of India

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ICICI Bank Ltd

(A) About ICICI Bank Limited

ICICI Bank Limited is an Indian multinational bank and financial services company with its corporate office in Mumbai, Maharashtra.

It offers a wide range of banking products and financial services for corporate and retail customers through a variety of delivery channels.

Moreover, the bank has a network of 5,266 branches and 14,136 ATMs across India and has a presence in 17 countries.

Moreover, ICICI Bank has specialized subsidiaries. Furthermore, ICICI Bank’s subsidiaries include India’s leading private sector insurance, asset management and securities brokerage companies, and among the country’s largest private equity firms. Additionally, it is present across 15 countries, including India.

As per the Market Cap ICICI Bank is the 2nd Largest bank under the Indian Banking Industry sector.

(B) Journey Since Inception

(C) Executive Board Members of ICICI Bank

(i) Sandeep Bakhshi – MD and CEO

Mr Sandeep Bakhshi is the Managing Director and CEO of ICICI Bank since October 15, 2018.

Prior to his appointment as MD & CEO, he was a Whole time Director and the Chief Operating Officer (COO) of the Bank.

Mr Bakhshi has been with the ICICI Group since 1986 and has handled various assignments across the group in ICICI Limited, ICICI Lombard General Insurance, ICICI Bank and ICICI Prudential Life Insurance.

He has completed his management studies from XLRI in Jamshedpur.

Moreover, Mr. Bakhshi core expertise is in Finance, Banking and Insurance.

Mr Sandeep Bakhshi received Remuneration in the FY21 Rs. 38 Lakh i.e. ~0.002% of Net Profit

(ii) Mr. Anup Bagchi – Executive Director

Mr. Anup Bagchi is an Executive Director on the Board of ICICI Bank since February 1, 2017.

He has a management degree from the Indian Institute of Management, Bangalore and an engineering degree from the Indian Institute of Technology, Kanpur.

Furthermore, He is responsible for the Retail Banking, Digital Channels and Partnerships, Rural and Inclusive Banking Group, Data Sciences and Analytics Group.

Moreover, he also manages retail products, remittances and NRI service for International Banking business the and Corporate Brand of the bank.

Mr Anup Bagchi received Remuneration in the FY21 was Rs. 5.29 Crore i.e. ~0.026% of Net Profit

(iii) Ms. Vishakha Mulye

Ms. Vishakha Mulye is an Executive Director of the ICICI Bank Ltd.

Ms. Vishakha is Charted Accountant. She is responsible for domestic and international Wholesale Banking Group, Proprietary Trading Group, Markets Group and Transaction Banking Group at the Bank.

Ms. Mulye has a experience in area of strategy, treasury & markets, proprietary equity investing and management.

Moreover, She handled the responsibilities of long-term equity investments, structured finance, management of special assets and corporate & project finance.

Remuneration received by Ms. Vishakha Mulye in the FY21 was Rs. 5.46 Crore i.e. ~0.027% of Net Profit

(iv) Mr Sandeep Batra

Mr. Sandeep Batra is an Executive Director on the Board of ICICI Bank since December 23, 2020.

Mr. Batra has done Chartered Accountant and a Company Secretary. He has been with the ICICI Group since 2000.

He is responsible for the Operations and Customer Service Group, Human Resource Management Group, Technology Group, Legal Group, Corporate Communications and Secretarial Group.

Moreover, He is also administratively responsible for Risk function, Internal Audit and Financial Crime Prevention Group and Compliance Group.

Ms Sandeep Batra’s remuneration for FY 21 was Rs 1.47 Crore i.e. ~0.007% of Net Profit

(D) Shareholding Pattern of ICICI Bank Ltd.

ICICI Bank Ltd - Share Holding Pattern

In ICICI Bank Ltd, the Promotor Holding is NIL. However, Company’s major shares are held by FPIs being 47.29%.

ICICI Bank Ltd - Shareholder Shareholding Public

(E) Business of ICICI Bank Ltd

(i) Retail, SME and rural banking

ICICI Bank offers deposit, credit and other financial products and services to individuals, households and small
businesses across India, through our digital channels and extensive branch network spanning urban and
rural areas. The company also offers select products like deposits and remittances to non-resident Indians, and local
market offerings in select international geographies.

Moreover, Bank has adopted many Digital tools to drive the growth of Retail segment.

During the FY21, Bank has enabled Mobile ATM Vans, Video-KYC, Cardless withdrawal, and WhatsApp Banking to process the function in seamless way.

The Rural Portfolio

The Rural banking operations aim to meet the financial requirements of customers in rural and semi-urban
locations.

Further, under the Rural Banking products Portfolio includes working capital loans for growing crops, financing post-harvest activities, loans against gold jewellery.

Not only, Under the same Folio Bank offers personal loans, financing against warehouse receipts, farm equipment loans, affordable housing finance and auto and two-wheeler loans.

The Portfolio of Rural market include Agriculture, Dealers, Self-Employed, Corporates, Institutions and Micro-Entrepreneurs.

(ii) Wholesale banking segment

The Wholesale Banking segment has a wide and deep client franchise.

ICICI Bank offers financial solutions to large and medium-sized companies and their business and channel partners, and to financial and government/public sector entities. Also, the product offerings include deposits, long-term finance, working capital, trade, cash management, transaction banking and treasury management. In addition to bank’s network in India, the Company leverage its international presence to meet the cross-border requirements of its clients.

ICICI Bank offers retail banking solutions to employees of its corporate clients. Moreover, the Company aims to comprehensively serve the ecosystems of its corporate clients.

Moreover, ICICI Bank offers other products that the client may need across trade, treasury, bonds, commercial papers, channel financing, supply chain solutions, and various other activities.

Further, this segment includes Corporates, Capital Markets, Government, Financial Institutions, Small & Medium Enterprises, International Businesses.

(iii) Treasury segment

Bank’s treasury operations comprise management of the Bank’s liquidity, government securities portfolio.

Moreover, this segment includes interest rate risk, proprietary trading, and foreign exchange and derivative solutions for clients.

(F) Loan Book

ICICI Bank Ltd - Loan portfolio Breakup
ICICI Bank Ltd - Loan Portfolio 30 Sep 2021

ICICI Bank has a very diversified Loan Portfolio and very large network to cater almost all ages and groups.

Out of Total loan portfolio, 62.1% of Loan Portfolio covered by retail portfolio. Retail segments consists of mortgages, Auto, commercial vehicles, 2 wheeler loans, rural loans, personal loans, credit cards Business banking etc.

Further, Mortgages are 34.4%, Auto Finance 4.9%, 9.3% rural Loans and 6.8% personal loan of total loan portfolio.

Whereas, other segments, that are 22.8% of portfolio consists of corporate and others, 5% of consists with overseas portfolio.

Additionally, credit card Loan portfolio cover 2.6% and SMEs consists of 4.3% loan Portfolio.

(G) Segment wise – Loan Advances

ICICI Bank Ltd - Segment Wise loan Advances

Over the years, ICICI Bank strengthened the retail segment.

Eventually, in FY21, ICICI Provided 66.70% loans to Retail segment, 24.10% to Domestic Corporates sectors.

moreover, 5.10% of Loans to overseas and only 4.10% to SMEs Segment of total Advances.

(ii) Segmental wise Revenue Breakup

Retail Segment is a major contributor towards Revenue i.e. 30.63% in FY21. However, Wholesale Banking contributed 15.05% in FY21.

The consolidated profit after tax increased from Rs 11225.47 Cr in fiscal 2020 to Rs 20363.97 Cr in FY21 primarily due to an increase in the profit of ICICI Bank, ICICI Securities, ICICI Securities Primary Dealership, ICICI General and ICICI Prudential Asset Management Company, offset, in part, by a decrease in profit of ICICI Life, ICICI Bank Canada and ICICI Bank UK.

In FY21, ICICI Bank ~98% of revenue came though domestic operations and ~2% from Foreign Operations.

(H) Market Share in Credit Cards Segment

(i) Market Share in Card in force

ICICI Bank Ltd - % of Market Share

ICICI bank has 3rd Leading position in the credit card Industry in terms of Card in force.

Further, in the past years, ICICI Bank is able to achieve more market share in Credit card industry.

Moreover, in FY21 ICICI Bank’s recorded 17.2% of Market Share in Card in Force in Credit Cards.

(ii) Market Share in Card in Spends

ICICI Bank Ltd - % of Market Share in Credit Card

The Bank took Digital initiatives to empower the retail segments. Eventually, in FY21, ICICI has increased its Market share from 12.3% to 17.7% in credit card spends.

(iii) Global Presence

ICICI Bank has also international presence.

ICICI Bank Ltd - Global Presence and Network

ICICI Bank’s consists of branches in the United States, Singapore, Hong Kong, Bahrain, Dubai International Finance Centre, South Africa, China, Offshore Banking Unit (OBU) and IFSC Banking Unit (IBU).

Also, the Bank opened a new representative office in Nepal and closed its branch in Sri Lanka in FY21.

Also, its Representative offices are in Bangladesh, Dubai, Abu Dhabi, Indonesia and Malaysia.

Moreover, the Bank plays a pioneering role in promoting digital initiatives across businesses in the international banking arena.

Further, the recent and value-added digitised services for NRI customers resulted in 85% of NRI customers being digitally active.

(I) Interest Parameters

(i) Interest Income – ICICI Bank Ltd

ICICI Bank Limited’s Interest Income includes Interest on Loans, Interest Income From Investments, Interest on Deposits with Banks and other Interest Income.

ICICI Bank Ltd - Interest Income

(ii) Interest Expenditure – ICICI Bank Ltd

ICICI Bank Ltd - interest Expenditure

(iii) Net Interest Income – ICICI Bank Ltd

The Net Interest Income of ICICI bank Ltd has grown in very steady manner over the years. Net Interest Income of the Company grew at a CAGR of 15.23% from FY12 to FY21.

ICICI Bank Ltd -  net interest income

(iii) Net Interest Margin – ICICI Bank Ltd

Over the past 10 years, ICICI Bank has shown a good performance in Net interest Margin.

(J) Operational Parameters of ICICI Bank Ltd

(i) Average Yield On Assets (advances)

ICICI Bank Ltd - yield On advances

(ii) Cost To Income Ratio

ICICI Bank Ltd - cost to income

(iii) CASA Ratio

ICICI Bank Ltd - CASA Ratio

Over past 10 Years, ICICI Bank’s CASA Ratio i.e, current and savings account ratio is stable and shown a constant growth.

Current and savings account (CASA) deposits increased by 24.1% from 3,478.19 billion at March 31, 2020 to 4,316.23 billion at March 31, 2021.

Average CASA deposits grew by 18.9% YoY in FY21.

(iv) Interest Spread

ICICI Bank Ltd -  Interest Spread

Over the past 10 years, Company % of Interest spread shown a very volatile performance.

whereas, In FY21, Company commanded 7.40% of interest spread ratio.

(iii) Capital Adequacy Ratio (CAR)

Company’s CAR Appreciated by ~3% from the previous year.

(v) Gross NPA %

ICICI Bank Ltd - GNPA

Company’s Asset Quality is stable over the years. Company’s Gross NPA has shown reduction by 1.1% in FY21 from 6.40% to 5.3%.

(vi) Net NPA %

ICICI Bank Ltd - NNPA

The Net NPA has also shown reduction to 1.24% in 2021 against 1.54% in the previous Fiscal Year. which is positive aspect for the Bank.

Also, fresh NPA generation remained at elevated levels in FY2021, mainly because of the impact of Covid-19, especially in the retail segment.

(K) Subsidiaries & Associates of ICICI Bank Ltd.

ICICI Bank Ltd has 16 Wholly owned subsidiaries including 5 subsidiaries in Overseas.

On the other hand, ICICI bank has 7 Associates having specific stakes in each associates.

ICICI Bank Ltd - subsidiaries and Associates

(L) Financial Parameters

ICICI Bank Ltd - Financial Parameters.

ICICI Bank Ltd Operating income has shown steady growth over the years. Its operating income grew at a CAGR of 10% over the last 10 Financial Years.

During FY2021, its retail assets grew by 20% on a YoY basis while the corporate segment grew by 10%, offset by a 30% decline in overseas advances.

The Company’s Profit grew at CAGR of 11% over the last 10 years.

Company has been maintaining a healthy track record of Return On Assets (ROA) and Return On Equity (ROE) over past 10 years.

Some regulatory guidelines did not permit banks to declare dividend in FY20, the Board of Directors recommended payment of dividend to the shareholders for FY21.

Standalone Segment wise performance:

Retail banking segment: The profit before tax of the segment decreased by 13.9% from ~ Rs 8993 Cr in FY20 to ~ Rs 7740 Cr in FY21 primarily due to an increase in provisions and a decrease in non-interest income, offset, in part, by an increase in net interest income and a decrease in non-interest expenses.

Wholesale banking segment: The profit before tax of the segment increased from ~ Rs 927 Cr in FY20 as compared to ~ Rs 5820 Cr in FY21 primarily due to a decrease in provisions and an increase in net interest income, offset, in part, by a decrease in non-interest income and an increase in noninterest expenses.

Treasury segment: The profit before tax of the segment increased from ~ Rs 5055 Crore in FY20 to ~ Rs 11080 Cr in FY21 primarily due to an increase in interest income on investments, increase in non-interest income and a decrease in borrowing cost.

(M) Management Discussion & Concall Highlights

ICICI Bank continued to strengthen its franchise & delivery and servicing capabilities, with a range of digital initiatives.

The bank is creating use cases across the customer lifecycle, i.e. in acquisitions, deepening relationship, cross sell, and risk management.

Net NPA ratio decreased from 1.41% at March 31, 2020 to 1.14% at March 31, 2021.

In FY21 The Bank raised equity of Rs 150.00 billion through Qualified Institutions Placement to further strengthen the balance sheet, further strengthening its capital adequacy and improving its competitive positioning.

At March 31, 2021, the consolidated Tier-1 capital adequacy ratio was 17.81%

In FY21, the Bank is the leader in electronic toll collection transactions done through FASTag with a 35.5% market
share by value at the end of FY21.

Further, the new and value-added digitised services for NRI customers resulted in 85% of NRI customers being digitally active in FY21.

The management focus is on capturing the end-to-end opportunity in the complete value chain, maximizing the risk calibrated operating profit.

Bank launched initiatives like ICICI Stack in March 2020. It enabled banking on digital platforms for all customer segments.

As per the plan of exiting from overseas business, non-India linked portfolio declined in FY21.

Amazon Pay Credit Card: The Bank added 2m cards in the past three years, with 1m additions during the pandemic. Of this, 60% are new to the bank, with a monthly activation rate at 1.3x that of the industry. The focus is on cross selling
Home, Auto, and Personal loans to such new to bank customers.

ICICI Bank Ltd: Operating Income excluding Insurance Business & Other Income

ICICI Bank Ltd: Operating Income excluding Insurance Business & Other Income

(N) Opportunities & Strengths

(i) Market Share

Based on a customer-centric approach, Bank able to respond to the needs of our customers and launch digital alternatives to cater in sophisticated manner which helps in gaining the market share.

ICICI Bank Ltd is one of the three systemically important banks in India with a 7.04% (6.79% as on December 31, 2019) market share in the banking sector advances and 19.2% (18.8% as on December 31, 2019) share in the private sector advances as on December 31, 2020.

(ii) Wide portfolio of financial services

Along with its subsidiaries, IBL has a wide presence across various financial services verticals like life insurance, general
insurance, securities broking, merchant banking, asset management, primary dealership, etc, with a leadership position in many of these businesses.

Such services allows it to provide a diverse range of financial services to customers, thereby enhancing its customer engagement and retention strategy.

(iii) Strategic importance to and majority ownership by, ICICI Bank

ICICI Bank holds 75.0% stake in I-Sec, post the IPO in March 2018 and OFS in December 2020.

Institutional and retail broking is a key activity for the ICICI group, and I-Sec not only enables the group to provide the entire range of products related to capital markets, but also enhances diversification of the group’s revenue profile.

I-Sec distributes many financial market products, including insurance, mutual funds etc, for the ICICI group.

(iv)  Strong resource profile

The bank has a strong retail franchise which helps in mobilization of low-cost deposits and has helped the bank in
consistently maintaining healthy CASA mix.

ICICI bank’s deposits stood at Rs.9,32,522 Crore as on March 31, 2020 showing growth of 21% YoY.

(O) Weakness

Moderate asset quality

Exposure to top 20 borrowers (excluding banks) as % of total exposure stood at 11.9% at 31, Dec, ’20 (31 March, ’20: 11%) and the exposure to top 10 groups as % of total exposure stood at 12.2% at 31 Dec, ’20 (31 March, ’20: 12.2%).

The increase in exposure to top-20 borrowers is due to increase in exposure to PSU and highly rated entities.

Total exposure to power sector stood at Rs.33,998 Crore at 31 Dec, ’20 (March 31, 2020: Rs. 38,028 Crore) of which, 25% exposure was to borrowers classified as NPA or part of BB & below rating profile and ~85% of the exposures were rated at A- and above (excluding exposure to State Electricity boards) as on 31 Dec, ’20.

Drop us your query at – info@pawealth.in or Visit pawealth.in

References:  Annual Reports, News Publications, Investor Presentations, Corporate Announcements, Management Discussions, Analyst Meets & Management Interviews, Industry’s Publications.

Disclaimer: The report only represents personal opinions and views of the author. No part of the report should be considered as recommendation for buying/selling any stock. Thus, the report & references mentioned are only for the information of the readers about the industry stated.

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