Overview

ICICI Bank (NSE:ICICIBANK) is a leading private sector bank in India. The Bank’s consolidated total assets stood at Rs.12.50 trillion at June 30, 2019. ICICI Bank currently has a network of 5,275 branches and 15,589 ATMs across India.¹

ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its wholly-owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46% through a public offering of shares in India in fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian industry. The principal objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses.²

In the 1990s, ICICI transformed its business from a development financial institution offering only project finance to a diversified financial services group offering a wide variety of products and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE.

After consideration of various corporate structuring alternatives in the context of the emerging competitive scenario in the Indian banking industry, and the move towards universal banking, the managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI Bank would be the optimal strategic alternative for both entities, and would create the optimal legal structure for the ICICI group's universal banking strategy. The merger would enhance value for ICICI shareholders through the merged entity's access to low-cost deposits, greater opportunities for earning fee-based income and the ability to participate in the payments system and provide transaction-banking services. The merger would enhance value for ICICI Bank shareholders through a large capital base and scale of operations, seamless access to ICICI's strong corporate relationships built up over five decades, entry into new business segments, higher market share in various business segments, particularly fee-based services, and access to the vast talent pool of ICICI and its subsidiaries.

In October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was approved by shareholders of ICICI and ICICI Bank in January 2002, by the High Court of Gujarat at Ahmedabad in March 2002, and by the High Court of Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI group's financing and banking operations, both wholesale and retail, have been integrated in a single entity.

Awards

ICICI Bank has emerged as the most trusted brand among private sector banks, according to a survey by the Economic Times Brand Equity. This is the fifth time in a trot that the Bank has topped ET's list of the most trusted brands among private sector banks.³

ICICI Bank has been adjudged the 'Best Company to Work For' by Business Today magazine in the Banking, Financial Services and Insurance (BFSI) sector. This is the fourth year in a row that the Bank has received this accolade. The Bank stood at the fourth position in the overall list of top 25 companies.

ICICI Bank has been adjudged as the ‘Best Bank in Innovation’ at the recently concluded Business Today-Money Today Financial Awards 2020. The Bank was recognised as the winner for InstaBIZ, an industry-first initiative which is a comprehensive digital platform curated specifically for MSME and self-employed customers.

ICICI Bank was awarded by the National Bank for Agricultural and Rural Development (NABARD) at the Gujarat State Focus Paper 2020-2021 event. The Bank won the award in the 'Best Bank Under SHG Bank Linkage Best Bank Category'. The Bank won the award for its work done to support women beneficiaries through its programme for Self Help Groups and also for facilitating credit linkages for relevant groups.

ICICI Bank has won six awards at ‘The Asset Triple A Digital Awards 2020’. This is the highest number of awards among all Banks in India. The Bank was declared winner in the following categories for the India region-‘Digital Bank of the Year’, ‘Best Retail Mobile Banking Experience’, ‘Best Digital Wealth Management Experience’, ‘Best ATM Project’, ‘Best Data Analytics Project’ and ‘Best Digital Upgrade’.

ICICI Bank won three awards at the IBA Banking Technology Awards 2020. The Bank was declared winner in two categories namely 'Best Use of Data & Analytics for Business Outcome' and 'Most Innovative Product Using Technology' while it was adjudged runner up in the 'Best Payment Initiatives' category.

ICICI Bank won the Bronze Medal in the ‘CSR & Not-for-Profit (beyond metro)’ category at The India PR & Corporate Communications Awards 2019. The Bank won this award for the skilling initiatives undertaken through ICICI Foundation for Inclusive Growth that help the less-privileged youth in rural and urban areas by enabling them to earn sustainable livelihoods.

Key Business Areas

The bank provids financial solutions for every customer.⁴

Retail, SME and Rural Banking

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

Wholesale Banking

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

Treasury

The company's treasury operations comprise management of the Bank’s liquidity, government securities portfolio and interest rate risk, proprietary trading, and foreign exchange and derivative solutions for clients.

Industry Overview

During fiscal 2019, non-food credit grew by 13.3% at March 29, 2019 while deposits grew by 10.0%. This resulted in the credit to deposit ratio increasing from 75.5% at March 31, 2018 to 77.7% at end-March 2019. In terms of sector-wise deployment of credit, credit growth in the services sector was at 17.8%, in the retail sector was at 16.4%, in industry was at 6.9% and in agriculture sector was at 7.9%, as on March 29, 2019. Additions to non-performing assets moderated during the nine months ended December 31, 2018. As per RBI’s Financial Stability Report for December 2018, the gross non-performing asset ratio for Indian banks declined from a peak of 11.5% at March 31, 2018 to 10.8% at September 30, 2018. However, challenges emerged for the non-banking financial companies (NBFCs) following a default by a large non-banking financial company engaged primarily in infrastructure. This resulted in tightening liquidity conditions and increase in yields on their debt, leading to refinancing challenges for NBFCs. In a step towards initiating consolidation in the banking sector, the government announced the merger of three public sector banks in fiscal 2019. The merger was effective from April 1, 2019.

During fiscal 2019, non-food credit grew by 13.3% at March 29, 2019 while deposits grew by 10.0%. This resulted in the credit to deposit ratio increasing from 75.5% at March 31, 2018 to 77.7% at end-March 2019. In terms of sector-wise deployment of credit, credit growth in the services sector was at 17.8%, in the retail sector was at 16.4%, in industry was at 6.9% and in agriculture sector was at 7.9%, as on March 29, 2019. Additions to non-performing assets moderated during the nine months ended December 31, 2018. As per RBI’s Financial Stability Report for December 2018, the gross non-performing asset ratio for Indian banks declined from a peak of 11.5% at March 31, 2018 to 10.8% at September 30, 2018. However, challenges emerged for the non-banking financial companies (NBFCs) following a default by a large non-banking financial company engaged primarily in infrastructure. This resulted in tightening liquidity conditions and increase in yields on their debt, leading to refinancing challenges for NBFCs. In a step towards initiating consolidation in the banking sector, the government announced the merger of three public sector banks in fiscal 2019. The merger was effective from April 1, 2019.

Business strategy

During fiscal 2019, the Bank was focussed on its strategic objective of risk calibrated profitable growth. Core operating profits of the Bank grew by 16.5% during fiscal 2019. The Bank made progress on increasing the granularity of its portfolio and enhancing the customer franchise during the year. Retail loans as a proportion of total loans increased from 56.6% at March 31, 2018 to 60.1% at March 31, 2019. Including non-fund based outstanding, retail loans as a proportion of total loans was 46.9% at March 31, 2019. The Bank continued to improve the portfolio mix by lending to higher rated well-established corporates and reduce concentration risk. The additions to non-performing loans moderated during the year, while provisions remained elevated. As a result, the provision coverage ratio improved substantially. The Bank maintained a strong capital position with capital adequacy ratios significantly above regulatory requirements.

Going forward, the Bank’s strategic focus of growing its core operating profits in a risk calibrated and granular manner would continue. The Bank seeks to build scalable and resilient businesses while operating within the guardrails of risk management. The Bank would seek to contain provisions within the levels set by its enterprise risk management framework. The Bank would aim to pursue growth in low capital consuming businesses and further strengthen its liabilities franchise. A customer-centric approach with ownership of growing the core operating profit at every level within the organisation would be an important driver in meeting the Bank’s strategic objectives.

The Bank would leverage its extensive network with wide geographical reach, a comprehensive range of products and services and state-of-the-art technology for providing superior customer experience. The Bank believes that there are significant opportunities across customer segments and their ecosystems. The Bank will aim to provide a comprehensive suite of financial services while profitably maximising its share of these opportunities, including by entering into mutually beneficial partnerships. The Bank is leveraging technology and analytics for deeper insights into customer needs and behaviour and making customer onboarding and transacting smooth and frictionless. The Bank would continue to invest in technologies to provide an edge in its offerings to customers.

Financial Highlights

On May 9, 2020 ICICI Bank Limited release quarterly results for the Quarter ended March 31, 2020.⁵

• The core operating profit (profit before provisions and tax, excluding treasury income) increased by 18% year-on-year to ₹ 7,148 crore (US$ 945 million) in Q4-2020 from ₹ 6,077 crore (US$ 803 million) in Q4-2019. The interest on income tax refund was ` 27 crore (US$ 4 million) in Q4- 2020 compared to ` 414 crore in Q4-2019 (US$ 55 million). Excluding the interest on income tax refund, core operating profit grew by 26% yearon-year in Q4-2020
• Net interest income (NII) increased by 17% year-on-year to ` 8,927 crore (US$ 1.2 billion) in Q4-2020 from ` 7,620 crore (US$ 1.0 billion) in Q4- 2019. Excluding the interest on income tax refund, NII grew by 24% yearon-year in Q4-2020
• The net interest margin was 3.87% in Q4-2020 compared to 3.77% in the quarter ended December 31, 2019 (Q3-2020) and 3.72% in Q4-2019
• Non-interest income, excluding treasury income, increased by 16% year-on-year to ₹ 4,013 crore (US$ 530 million) in Q4-2020 compared to ₹ 3,465 crore (US$ 458 million) in Q4-2019
• Treasury income grew by 55% year-on-year to ` 242 crore (US$ 32 million) in Q4-2020 from ` 156 crore (US$ 21 million) in Q4-2019

Operating review

Credit growth

The year-on-year growth in domestic advances was 13% at March 31, 2020. The Bank has continued to leverage its strong retail franchise, resulting in a 16% year-on-year growth in the retail loan portfolio at March 31, 2020. Including non-fund outstanding, retail was 53.3% of the total portfolio at March 31, 2020. Growth in the performing domestic corporate portfolio was about 9% year-on-year. Total advances increased by 10% year-on-year to ` 645,290 crore (US$ 85.3 billion) at March 31, 2020 from ` 586,647 crore (US$ 77.5 billion) at March 31, 2019.

Deposit growth

Total deposits increased by 18% year-on-year to ` 770,969 crore (US$ 101.9 billion) at March 31, 2020. Average current account deposits increased by 15% year-on-year in Q4-2020. Average savings account deposits increased by 11% year-on-year in Q4-2020. The average CASA ratio was 42.3% in Q4- 2020 compared to 42.8% in Q3-2020 and 44.6% in Q4-2019. The period-end CASA ratio was 45.1% at March 31, 2020 compared to 47.0% at December 31, 2019 and 49.6% at March 31, 2019. Total term deposits increased by 29% year-on-year to ` 423,151 crore (US$ 55.9 billion) at March 31, 2020.

The Bank had a network of 5,324 branches and 15,688 ATMs at March 31, 2020.

Digital initiatives and transactions

In March 2020, the Bank launched a comprehensive digital banking platform called ICICI STACK. This platform offers nearly 500 services to ensure uninterrupted banking experience to the retail, business banking, SME and corporate customers. Many of these services are first-in-the industry and are available instantly on the Bank’s mobile banking platforms such as iMobile and InstaBIZ or the internet banking platform. These services include digital account opening, instant loans, payment solutions, investments and health and term insurance. Small business customers can also use the APIs from the recently launched API Banking Portal to integrate various payment and product solutions. The Bank’s customers can continue banking digitally from a remote location, without visiting a branch or office.

The volume of mobile banking transactions increased by 98% year-on-year in Q4-2020. The volume of transactions on Unified Payments Interface (UPI) increased by 161% y-o-y in Q4-2020. Digital channels like internet, mobile banking, POS and others accounted for over 88% of the savings account transactions in FY2020.

Asset quality

During the quarter, the gross additions to NPAs were ₹ 5,306 crore (US$ 701 million). Recoveries and upgrades, excluding write-offs, from nonperforming loans were ` 1,883 crore (US$ 249 million) in Q4-2020. Net nonperforming assets reduced by 26% from ` 13,577 crore (US$ 1.8 billion) at March 31, 2019 to ` 10,114 crore (US$ 1.3 billion) at March 31, 2020. The net NPA ratio decreased from 2.06% at March 31, 2019 to 1.41% at March 31, 2020. The provision coverage on non-performing loans, excluding cumulative technical write-offs, increased from 70.6% at March 31, 2019 to 75.7% at March 31, 2020. The provision coverage ratio on non-performing loans, including cumulative technical write-offs, was 86.8% at March 31, 2020 compared to 80.7% at March 31, 2019. At March 31, 2020, the fundbased and non-fund based outstanding to borrowers rated BB and below (excluding non-performing assets) was ` 16,668 crore (US$ 2.2 billion) compared to ` 17,525 crore (US$ 2.3 billion) at March 31, 2019 and ` 17,403 crore (US$ 2.3 billion) at December 31, 2019.

Capital adequacy

The Bank’s total capital adequacy at March 31, 2020 as per the Reserve Bank of India’s guidelines on Basel III norms, including profits for FY2020, was

16.11% and Tier-1 capital adequacy was 14.72% compared to the minimum regulatory requirements of 11.08% and 9.08% respectively.

Consolidated results

Consolidated profit after tax was ` 1,251 crore (US$ 165 million) in Q4-2020 compared to ` 1,170 crore (US$ 155 million) in Q4-2019. Consolidated profit after tax was ` 9,566 crore (US$ 1.3 billion) in FY2020 compared to ` 4,254 crore (US$ 562 million) in FY2019.

Consolidated assets grew by 11.2% year-on-year to ` 1,377,292 crore (US$ 182.0 billion) at March 31, 2020 from ` 1,238,794 crore (US$ 163.7 billion) at March 31, 2019.

Recent developments

On June 2 2020, ICICI Bank has announced a reduction in its savings bank account interest rate with effect from June 4, 2020.⁶

For Savings bank balance Below ₹ 50 lakhs from 3.25% per annum to 3.00% per annum

For Savings bank balance ₹ 50 lakhs and above from 3.75% per annum to 3.50% per annum

ICICI Bank Consolidated December 2020 Net Interest Income (NII) at Rs 11,801.84 crore, up 14.29% Y-o-Y ⁷

February 02, 2021; Reported Consolidated quarterly numbers for ICICI Bank are:

• Net Interest Income (NII) at Rs 11,801.84 crore in December 2020 up 14.29% from Rs. 10325.82 crore in December 2019.
• Quarterly Net Profit at Rs. 5,498.15 crore in December 2020 up 17.73% from Rs. 4,670.10 crore in December 2019.
• Operating Profit stands at Rs. 10,258.28 crore in December 2020 up 15.3% from Rs. 8,896.72 crore in December 2019.
• ICICI Bank EPS has increased to Rs. 7.97 in December 2020 from Rs. 7.22 in December 2019.

References

1. ^ https://www.icicibank.com/aboutus/about-us.page
2. ^ https://www.icicibank.com/aboutus/history.page
3. ^ https://www.icicibank.com/aboutus/awards.page
4. ^ https://www.bseindia.com/bseplus/AnnualReport/532174/5321740319.pdf
5. ^ https://www.icicibank.com/managed-assets/docs/investor/quarterly-financial-results/2020/2020-05-Q4_2020_PR1.pdf
6. ^ https://www.bseindia.com/xml-data/corpfiling/AttachHis/92edeba3-0896-4423-bd26-5362eb2852c8.pdf
7. ^ https://www.moneycontrol.com/news/business/earnings/icici-bank-consolidated-december-2020-net-interest-income-nii-at-rs-11801-84-crore-up-14-29-y-o-y-6432501.html