SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

REPORT ON

Financial Statement Analysis of ICICI BANK for fy – 20

(1 April 2019 – 31 March 2020)

By
Ajinkya Yadav
MBA – Executive Finance
PRN - 19020348002
Profile of Group Business
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

ICICI Bank is a large private sector bank in India offering a diversified portfolio of
financial products and services to retail, SME and corporate customers. The Bank has an
extensive network of branches, ATMs and other touchpoints. It is at the forefront of
leveraging technology and offering services through digital channels like mobile and
internet banking.

Vision Statement of ICICI  To be the trusted financial services provider of choice for
our customers, thereby creating sustainable value for our stakeholders.

Mission Statement of ICICI 

To grow our risk-calibrated core operating profit by:
- Delivering products and services that create value for customers
- Bringing together all our capabilities to seamlessly meet customer needs
- Conducting our business within well-defined risk tolerance levels

ICICI Key Business Areas are –

1. Retail Rural & SME Banking: ICICI offer deposit, credit and other financial
products and services to individuals, households and small businesses across
India, through digital channels and extensive branch network spanning urban and
rural areas. We also offer select products like deposits and remittances to non-
resident Indians, and local market offerings in select international geographies.
2. Wholesale Banking: 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 our network in India, we leverage our
international presence to meet the cross-border requirements of our clients.
3. Treasury: ICICI 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.

SNAPSHOT OF ICICI GROUP BUSINESS

 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

Strengths, Weaknesses, Opportunities, Threats (SWOT)

 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

Segmentation - Targeting - Positioning

Segmentatio People who want to invest in banking industry
n
Target High- & Mid-Income Groups
Positioning Technologically Advanced & Customer Friendly

Front runner in the Indian Private Banking Sector.

Strong presence via its branches & 14000+ ATMs.
High use of technology to make life simpler for the customers.
Large number of facilities for the customers in terms of products and services.
75000+ Workforce.
STRENGTHS
Long term presence along with marketing has added to the brand name.
Presence in over 19 countries.
Celebrity brand ambassadors has boosted the brand's image.
Technology based services.
Several awards for its banking, CSR activities and other initiatives.

High competition means limited market share growth for ICICI bank.
WEAKNESSES
Allegations of money laundering, debt recovery etc hurt the brand image.

Opening more branches in the rural areas can boost ICICI's business.
OPPORTUNITIE Use of technology to penetrate rural markets.
S Venturing into countries like Africa where the economy is coming up.
ICICI bank can tap the youth by promoting their app and net banking.

Ever changing RBI policies can affect operations.

International and other Competitors.
THREATS
Inability to adapt to changing conditions due to large size.
Concern on privacy of user accounts using netbanking.
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

Focus Area(s) and USPs in core (banking) business

360 Degree Customer Centric Approach

Capture Opportunities Across Ecosystems (Cross Selling & Lane Expansions)
Leverage Internal Synergies – Build Partnerships
Focus Area Decongest processes – Flexibility To Operate Within Guardrails
Increase Market Share Ensuring Operating Profits Aspirations
One Bank – One ROE – One KPI
Fair To Customer – Fair To Bank

Composition of Assets and Liabilities (Vertical Analysis)

ICICI has managed to maintain a diversified loan book
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

Retail loan books comprised the majority of ICICI Bank Limited's total loan book
as of June 30, 2002. This amounted to about 64 percent. Around 32 percent of
these loans were mortgages. In financial year 2020, over six trillion Indian rupees
worth of loans were allocated by the bank. ICICI Bank remains to be a key player
in India’s private banking sector.

Composition of total loan book looks strong as the retail portfolio is largely
secured and built on proprietary data and analytics in addition to bureau checks
and also well-priced in relation to risks.
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

ICICI has been working on to reduce the overseas portfolio as far as the loan
book is considered. With meticulous planning ICICI has been progressively exiting
the exposures that are not linked to India. The overseas non-India linked
corporate portfolio reduced by about 40.4% y-o-y and 16.1% sequentially and
the Total overseas loan book reduced to the amount of USD 6.2 billion as on
June 30, 2020.

ICICI has put in substantial efforts towards improving the loan book portfolio. Based on
the internal ratings of the banks the loan book portfolio looks very strong, taking into
consideration the well-priced loans.

Another targeted effort by ICICI show that how the concentrated risk has been reduced.
Including other banks, we can see a meaningful change in the profile of exposures to
top borrowers and groups.
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

Gross NPA additions have declined and provision coverage ratio has improved
substantially based on below points.

- Based on customer assets.

- Lower gross NPA additions in Q1-2021 reflect the asset classification standstill
benefit on loans under moratorium
- Excluding technical write-offs
- Gross NPA additions as a percentage of opening gross customer assets,
annualized for Q1-2021

Loans under moratorium –

• Moratorium is a policy and regulatory support to customers facing sudden

cashflow depletion or potential future uncertainty

• The Bank’s approach to moratorium has been to permit the same for customers
seeking it, after due engagement

From about 30.0% of total loans being under moratorium at end-April, the loans to
customers where moratorium was affected for June repayments was about 17.5% of
total loans at June 30, 2020; in line with expectations and the gradual resumption of
economic activities in June 2020

About 90% of the portfolio under moratorium at end-June 2020 comprises loans
that were also under moratorium at end-May 2020
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

Collection Strategy –

Pre-delinquency management engine:

• Using artificial intelligence

• Uses more than multiple variables to create various microsegments

• Accurately forecasts most of the bounces for the right intervention at the right
time

• In view of the current environment additional markers such as zones under

lockdown, industries directly impacted by Covid-19 and salary uploads added

Strengthened the collections infrastructure

• Re-organized sales, credit, operations and customer service teams

• Connected to over 400,000 customers on a daily basis using Cloud Telephony

and Voicebots to counsel on moratorium

• Using API based integrations with large payment channels to ensure timely credit
of the overdue amount

Approach to asset quality and provisioning

• Construct the portfolio in a manner that does not deliver concentrated shocks.

• Build an operating profit base that can absorb required provisions.

• Remain proactive in provisioning with the objective of ensuring that the balance
sheet is robust and the impact on earnings is recognized on a prudent basis.

• COVID19 related provisions of INR 27.75 billion made in Q4 2020 against

standard assets to further strengthen the balance sheet.

• COVID19 related provisions of INR 55.50 billion made in Q1 2021

Composition of Assets and Liabilities (Vertical Analysis)

SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

Actuals (Billions) Vertical Analysis

Particulars
Mar-19 Mar-20 Jun-20 Mar-19 Mar-20 Jun-20
Net Worth 1,104.00 1,165.04 1,186.19 11.46% 10.61% 10.42%
Equity Capital 12.91 12.95 12.95 0.13% 0.12% 0.11%
Reserves 1,091.09 1,152.09 1,173.24 11.32% 10.49% 10.30%
Deposits 6,607.32 7,709.70 8,016.23 68.56% 70.19% 70.40%
Current 804.01 1,022.28 957.80 8.34% 9.31% 8.41%
Savings 2,184.76 2,455.91 2,448.36 22.67% 22.36% 21.50%
Term 3,618.55 4,231.51 4,610.07 37.55% 38.53% 40.49%
Borrowings 1,567.20 1,628.96 1,649.18 16.26% 14.83% 14.48%
Domestic Capital Instruments 255.01 218.17 193.41 2.65% 1.99% 1.70%
Domestic Other Borrowings 440.03 616.49 736.19 4.57% 5.61% 6.47%
Long Term Infrastructure Bonds 194.97 194.77 194.92 2.02% 1.77% 1.71%
Overseas Borrowings 677.19 599.53 524.66 7.03% 5.46% 4.61%
Other Liabilities 359.01 479.95 534.54 3.73% 4.37% 4.69%
Total Liabilities 9,637.53 10,983.65 11,386.14 100.00% 100.00% 100.00%
Capital Adequacy Ratios (%) 17% 16% 16%
KEY PERFORMANCE INDICATORS
Tier 1 (%) 15% 15% 15%
Tier 2 (%) 2% 1% 1%
`
( billion) Jun 2019 Mar 2020 Jun 2020 Y-o-Y Grth % Jun 2020
CASA 2,988.77 3,478.18 3,406.16 14.0% 42.5%
- Current 804.01 1,022.27 957.80 19.1% 11.9%
- Savings 2,184.76 2,455.91 2,448.36 12.1% 30.5%
Term 3,618.55 4,231.51 4,610.07 27.4% 57.5%
Total deposits 6,607.32 7,709.69 8,016.22 21.3% 100.0%
During the year under review, the Bank allotted 26,525,550 equity shares of INR 2.00
each pursuant to exercise of stock options under the Employee Stock Option Scheme.
The Bank has repositioned its international franchise to focus on non-resident Indians
for deposits, wealth and remittances businesses, with digital and process decongestion
as a key enabler. The Bank is also focused on deepening its relationships with well-rated
Indian corporates in international markets and multinational companies present in
international as well as domestic market, for maximising the India-linked trade,
transaction banking and lending opportunities with strict limits on exposures including
reduction in current exposure where required. The Bank is also actively engaging with
sovereign wealth funds, global pension funds and asset managers to facilitate fund
flows into India. The Bank aims to progressively exit exposures that are not linked to
India in a planned manner.
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

The cost of funds was 5.09% in fiscal 2020 as compared to 5.10% in fiscal 2019 because
of:

- The cost of borrowings decreased by 18 basis points from 5.86% in fiscal 2019
to 5.68% in fiscal 2020 primarily due to a decrease in interest expense on
funding swaps, a decrease in proportion of bond borrowings which are
relatively higher cost and a decrease in cost of refinance borrowings. The cost
of average deposits increased from 4.87% fiscal 2019 to 4.96% in fiscal 2020
primarily due to a decrease in proportion of average CASA deposits in total
deposits due to higher growth in retail term deposits, offset, in part, by a
decrease in cost of domestic term deposits. The average CASA deposits
decreased from 45.9% of total average deposits in fiscal 2019 to 42.7% of
total average deposits in fiscal 2020. Average CASA deposits were 34.5% of
the total funding (i.e., deposits and borrowings) for fiscal 2020 as compared to
35.1% for fiscal 2019. The cost of domestic term deposits decreased by 6 basis
points from 6.73% in fiscal 2019 to 6.67% in fiscal 2020.

- The cost of borrowings decreased by 18 basis points from 5.86% in fiscal 2019
to 5.68% in fiscal 2020 primarily due to a decrease in interest expense on
funding swaps, a decrease in proportion of bond borrowings which are
relatively higher cost and a decrease in cost of refinance borrowings.
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

Composition of Investments (SLR & Classification of Portfolio)

Actuals (Billions) Vertical Analysis

Particulars
Mar-19 Mar-20 Jun-20 Mar-19 Mar-20 Jun-20
Net Worth 1,104.00 1,165.04 1,186.19 11.46% 10.61% 10.42%
Equity Capital 12.91 12.95 12.95 0.13% 0.12% 0.11%
Reserves 1,091.09 1,152.09 1,173.24 11.32% 10.49% 10.30%
Deposits 6,607.32 7,709.70 8,016.23 68.56% 70.19% 70.40%
Current 804.01 1,022.28 957.80 8.34% 9.31% 8.41%
Savings 2,184.76 2,455.91 2,448.36 22.67% 22.36% 21.50%
Term 3,618.55 4,231.51 4,610.07 37.55% 38.53% 40.49%
Borrowings 1,567.20 1,628.96 1,649.18 16.26% 14.83% 14.48%
Domestic Capital Instruments 255.01 218.17 193.41 2.65% 1.99% 1.70%
Domestic Other Borrowings 440.03 616.49 736.19 4.57% 5.61% 6.47%
Long Term Infrastructure Bonds 194.97 194.77 194.92 2.02% 1.77% 1.71%

The yield on average interest-earning assets increased by 35 basis points from 8.03% in
fiscal 2019 to 8.38% in fiscal 2020.

Various Key Ratios relevant to banking industry

 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

Percent FY2020 Q1-2020 Q1-2021

Net interest margin 3.73 3.61 3.69

Provisions/core operating profit 42.8 58.7 29.5

Provisions/average advances 1.86 2.40 1.30

Core operating profit/average assets 2.72 2.53 2.55

Return on average assets 0.81 0.81 0.95

Standalone return on equity 7.1 7.0 8.9

Consolidated return on equity 8.1 8.7 10.0

Weighted average EPS (INR) 12.3 11.9 16.1

Book value (INR) 180.0 171.1 183.2

Here, Kotak Mahindra Bank has highest Net Interest Margin followed by HDFC Bank,
Axis Bank and ICICI Bank respectively.
Being a retail-oriented bank with highest CASA ratio, Kotak Mahindra Bank leads in
terms of Net Interest Margin (NIM).
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

This ratio denotes the operational efficiency of the bank. Lower the cost to income ratio,
better it is.
In this quarter (Q2FY21), HDFC Bank has lowest cost to income ratio, while ICICI bank
has highest cost to income ratio.

Recently most of the banks have raised capital and hence Capital Adequacy Ratio (CAR)
has increased over the quarters.
Currently, Kotak Mahindra Bank has highest Capital Adequacy Ratio (CAR) of 23.4%
followed by Axis Bank, HDFC Bank and ICICI Bank.
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

Current Account and Savings Account deposits are the deposits bearing lower interest
rates as compared to timed deposits.
Hence, higher the proportion of CASA, lower the company’s interest cost.
Currently, Kotak Mahindra Bank being the largest retail bank has highest CASA ratio of
57% followed by HDFC Bank, ICICI Bank and Axis Bank.

Although ICICI Bank is known as a corporate bank, it has highest retail loan book share.
It has higher deposits from corporates than retail depositors.
This is followed by Kotak Mahindra Bank, Axis Bank and HDFC Bank.
There is an evident shift in HDFC Bank’s lending strategy from retail lending to
corporate lending over the last one year.
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

On asset quality front in terms of gross NPA, HDFC Bank looks better placed with lowest
Gross NPA of 1.08%.
On the other hand, ICICI Bank has highest gross NPA of 5.17%

In terms of Net NPAs as well, HDFC Bank is better placed with lowest Net NPA of 0.17%.
This is followed by Kotak Mahindra Bank, Axis Bank and ICICI Bank.
Here, although ICICI Bank has highest gross NPAs, its net NPAs are quite lower which
signifies that bank is undertaking adequate provisioning measures against the NPAs
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

All the banks have healthy provision coverage ratios with HDFC Bank having highest
PCR of 84.5%.
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

Credit Ratings of the Bank by external rating agencies

S&P: S&P Global Ratings,

JCRA: Japan Credit Rating Agency Limited
CARE: CARE Ratings Limited, India
ICRA: ICRA Limited, India
CRISIL: CRISIL Limited, India

During the year under review, there were no revisions in the credit ratings obtained by
the Bank.
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

Tier 1, Tier 2 and total CRAR values for the Bank

Capital adequacy ratios well above the minimum regulatory requirement of CET1 ratio
of 7.58%, Tier I ratio of 9.08% and total capital adequacy ratio of 11.08%
Capital position after making the further Covid-19 related provisions continued to be
healthy with a CET-1 ratio of 13.29%1at June 30, 2020
Mar 31, 2020 Jun 30, 2020
(INR billion) % (INR billion) %
Total capital 1,223.85 16.11% 1,222.33 16.00%
- Tier I 1,117.85 14.72% 1,115.88 14.61%
- of which: CET1 1,016.65 13.39% 1,014.68 13.29%
- Tier II 106.00 1.39% 106.45 1.39%
Risk weighted assets 7,594.90 7,635.83
- On balance sheet 6,676.25 6,764.69
- Off balance sheet 918.65 871.14
Capital adequacy ratios well above the minimum regulatory requirement of CET1
ratio of 7.58%, Tier I ratio of 9.08% and total capital adequacy ratio of 11.08%

Consolidated Capital Adequacy

Basel III (%) Mar 2020 Jun 2020
Total capital 15.81% 15.62%
- Tier I 14.41% 14.24%
- of which: CET 1 13.21% 13.05%
- Tier II 1.40% 1.38%
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

The Bank is subject to the Basel III capital adequacy guidelines stipulated by RBI with
effect from April 1, 2013. The guidelines provide a transition schedule for Basel III
implementation till March 31, 2020. As per the guidelines, the Tier-1 capital is made up
of Common Equity Tier-1 (CET1) and Additional Tier-1.
At March 31, 2020, Basel III guidelines require the Bank to maintain a minimum Capital
to Risk-Weighted Assets Ratio (CRAR) of 11.08% with minimum CET1 CRAR of 7.58%
and minimum Tier-1 CRAR of 9.08%. The minimum total CRAR, Tier-1 CRAR and CET1
CRAR requirement include capital conservation buffer of 1.88% and additional capital
requirement of 0.20% on account of the Bank being designated as Domestic
Systemically Important Bank.
Reserve Bank of India (RBI) issued Basel III guidelines applicable with effect from April 1,
2013. The guidelines provide a transition schedule for Basel III implementation till March
31, 2020. On March 27, 2020, the RBI has extended the transition period for
implementing the last tranche of 0.625% under capital conservation buffer (CCB) by six
months i.e. from March 31, 2020 to September 30, 2020. Upon full implementation of
Basel III guidelines, the minimum capital to risk-weighted assets ratio (CRAR) would be
11.70%, minimum Common Equity Tier-1 (CET1) CRAR ratio would be 8.20% and
minimum Tier-1 CRAR ratio would be 9.70%. This includes capital conservation buffer
(CCB) and additional CET1 capital surcharge on account of the Bank being designated as
a Domestic Systemically Important Bank (D-SIB).

Comments on Segmental Results

 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

The standalone segmental report for fiscal 2020, based on the segments identified and
defined by RBI, has been presented as follows:
- Retail Banking includes exposures of the Bank, which satisfy the four
qualifying criteria of ‘regulatory retail portfolio’ as stipulated by RBI guidelines
on the Basel III framework.
- Wholesale Banking includes all advances to trusts, partnership firms,
companies and statutory bodies, by the Bank which are not included in the
Retail Banking segment, as per RBI guidelines for the Bank.
- Treasury includes the entire investment portfolio of the Bank.
- Other Banking includes leasing operations and other items not attributable to
any particular business segment of the Bank.
- Unallocated includes items such as income tax paid in advance net of
provision for tax, deferred tax and provisions to the extent reckoned at entity
level.

Transfer Pricing Framework:

All liabilities are transfer priced to a central treasury unit, which pools all funds and lends
to the business units at appropriate rates based on the relevant maturity of assets being
funded after adjusting for regulatory reserve requirement and directed lending
requirements.

Retail Banking

Segment NII PBT

Retail Banking FY - 19 FY - 20 FY - 19 FY - 20
INR (Billions) 76.15 89.7 82.23 89.93
Segment NII PBT Non Interest Income
Retail Banking 2019 2020 2019 2020 2019 2020
INR (Billions) 76.15 89.7 82.23 89.93 76.15 89.7

- Net interest income increased by 22.5% in FY20 primarily due to growth in

average loan portfolio, an increase in yield on advances and an increase in
average deposits.

- The profit before tax of the segment increased by 9.4% in FY-20 primarily due
to an increase in net interest income and non-interest income, offset, in part,
by an increase in non-interest expenses and provisions.
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

- Non-interest income increased by 17.8% in FY20 primarily due to an increase

in fee income from credit card portfolio, transaction banking fees and lending
linked fees, offset, in part, by a decrease in income from third party products
distribution.

- Non-interest expenses increased by 17.9% in FY20 primarily due to an

increase in employee cost and other administrative expenses reflecting an
increase in business volume.

- The provisions (net of write-back) increased primarily due to Covid-19 related

general provision on standard assets as per RBI guidelines, provision on
farmer finance, an increase in portfolio and change in product mix.

Wholesale Banking

Segment NII PBT

Retail Banking 2019 2020 2019 2020
INR (Billions) 76.15 89.7 82.23 89.93
Segment NII PBT
Retail Banking 2019 2020 2019 2020
INR (Billions) 76.15 89.7 82.23 89.93

- Wholesale banking segment made a profit (before tax) of INR 9.27 billion in
fiscal 2020 as compared to a loss (before tax) of INR 102.42 billion in fiscal
2019 primarily due to a decrease in provisions and an increase in net interest
income.

- Net interest income increased by 34.7% in FY20 primarily due to an increase in

yield on advances, an increase in loan portfolio and an increase in average
deposits.

- Non-interest income increased by 9.0% in FY20

- Provisions decreased from INR 181.52 billion in fiscal 2019 to ` 93.95 billion in
fiscal 2020 primarily due to lower ageing provision on loans classified as NPAs
in earlier years.
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

Other Banking

Segment NII
Retail Banking 2019 2020
INR (Billions) 76.15 89.7

- Profit before tax of other banking segment decreased from INR 6.31 billion in
fiscal 2019 to INR 5.83 billion in fiscal 2020 primarily due to decrease in net
interest income and an increase in operating expenditure, offset, in part, by a
decrease in provision.

- Unallocated expenses in fiscal 2020 include Covid-19 related provision made

in excess of the provision requirement as per RBI guidelines in fiscal 2020
-
Treasury

Segment NII PBT

Retail Banking 2019 2020 2019 2020
INR (Billions) 76.15 89.7 82.23 89.93

Segment NII PBT

Retail Banking 2019 2020 2019 2020
INR (Billions) 76.15 89.7 82.23 89.93

- The profit before tax of the segment decreased by 2.1% in FY20

- Non-interest income increased from INR 27.71 billion in fiscal 2019 to INR
30.05 billion in fiscal 2020. In fiscal 2020, noninterest income primarily
included realised gain on sale of government securities. Non-interest income
of fiscal 2019 included a gain on sale of equity shares of ICICI Prudential Life
Insurance Company Limited of INR 11.10 billion.

- Non-interest expenses increased from INR 4.34 billion in fiscal 2019 to INR
8.95 billion in fiscal 2020 primarily due to an increase in cost towards
purchase of priority sector lending certificates.

- Provisions increased from INR 3.71 billion in fiscal 2019 to INR 4.48 billion in
fiscal 2020.
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

ICICI PRUDENTIAL LIFE INSURANCE COMPANY LIMITED (ICICI LIFE)

The Annualised Premium Equivalent (APE) was INR 73.81 billion for fiscal 2020 as
compared to INR 77.99 billion for fiscal 2019. The Value of New Business (VNB) margin
was 21.7% for fiscal 2020 compared to 17.0% for fiscal 2019. The company’s VNB
increased from INR 13.28 billion for fiscal 2019 to INR 16.05 billion for fiscal 2020. ICICI
Life’s total premium grew by 8.1% from INR 309.30 billion in fiscal 2019 to INR 334.31
billion in fiscal 2020. The total assets under management of ICICI Life stood at ` 1,529.68
billion at March 31, 2020. Net premium earned increased from ` 305.79 billion in fiscal
2019 to INR 328.79 billion in fiscal 2020. The profit after tax decreased from INR 11.41
billion in fiscal 2019 to INR 10.69 billion in fiscal 2020 primarily due to growth in the
protection and annuity businesses, though these businesses are value accretive from the
perspective of value of new business (VNB)
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

ICICI LOMBARD GENERAL INSURANCE COMPANY LIMITED (ICICI GENERAL)

ICICI General is among the large private sector general insurance companies in India.
ICICI General’s overall market share was 7.0% (excluding crop insurance market share
was 8.5%) during fiscal 2020 on the basis of gross direct premium according to the
General Insurance Council of India. The Gross Domestic Premium Income of ICICI
General decreased by 8.1% year-on-year to INR 133.13 billion in fiscal 2020. Net earned
premium increased from INR 83.75 billion in fiscal 2019 to INR 94.03 billion in fiscal
2020 primarily due to an increase in motor, fire and health insurance business. The profit
after tax increased from INR 10.49 billion in fiscal 2019 to INR 11.94 billion in fiscal 2020
primarily due to an increase in net earned premium and investment income, offset, in
part, by an increase in claims incurred and operating expenses. Profit after tax in fiscal
2020 includes the impact of income tax benefit due to change in tax rate.

ICICI PRUDENTIAL ASSET MANAGEMENT COMPANY LIMITED

ICICI Prudential AMC is India’s leading asset manager with average quarterly assets
under management (AUM) of INR 3,507.43 billion at March 31, 2020. The company’s
overall market share in the domestic mutual fund business was 12.98% on a quarterly
average basis. At March 31, 2020, the quarterly average equity mutual fund AUM
(excluding exchange traded funds) managed by the company was INR 1,378.91 billion
with a market share of 13.36%. As per Indian GAAP, the profit after tax of ICICI
Prudential AMC increased from INR 6.87 billion in fiscal 2019 to INR 10.49 billion in fiscal
2020 primarily due to a decrease in fund related expenses and other expenses. Profit
after tax in fiscal 2020 includes the impact of income tax benefit due to change in tax
rate.

ICICI SECURITIES LIMITED (ICICI SECURITIES)

The consolidated profit after tax of ICICI Securities Limited and its subsidiaries increased
from INR 4.95 billion in fiscal 2019 to INR 5.53 billion in fiscal 2020 primarily due to an
increase in net interest income and a decrease in staff cost and other administrative
expenses, offset, in part, by a decrease in other income. Profit after tax in fiscal 2020
includes the impact of income tax benefit due to change in tax rate.

ICICI SECURITIES PRIMARY DEALERSHIP LIMITED (I-SEC PD)

The profit after tax of I-Sec PD increased from INR 0.61 billion in fiscal 2019 to INR 2.26
billion in fiscal 2020 primarily due to an increase in net interest income and other
income. Trading gains increased primarily due to favourable market movements. During
fiscal 2020, yield on 10-year government securities decreased by 121 basis points as
compared to an increase of 9 basis points in fiscal 2019. Profit after tax in fiscal 2020
includes the impact of income tax benefit due to change in tax rate.
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

ICICI HOME FINANCE COMPANY LIMITED (ICICI HFC)

The profit/(loss) after tax of ICICI HFC decreased from a profit of INR 0.28 billion in fiscal
2019 to a loss of INR 1.17 billion in fiscal 2020 primarily due to higher provisioning on
non-performing assets and higher operating expenses in fiscal 2020 as compared to
fiscal 2019. Net NPAs decreased from INR 2.71 billion at March 31, 2019 to INR 2.33
billion at March 31, 2020. Net NPA ratio decreased from 2.07% at March 31, 2019 to
1.69% at March 31, 2020.

ICICI VENTURE FUNDS MANAGEMENT COMPANY LIMITED (ICICI VENTURE)

The profit after tax of ICICI Venture Fund Management Company Limited decreased
from INR 0.70 billion in fiscal 2019 to INR 0.13 billion in fiscal 2020 primarily due to a
decrease in fee income and other income, offset, in part, a decrease in staff cost and
other expenses.
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

Bank’s exposure to Interest Rate Risk

The yield on average interest-earning assets increased by 35 basis points from 8.03% in
fiscal 2019 to 8.38% in fiscal 2020 primarily due to the following factors:

- The yield on domestic advances increased by 42 basis points from 9.62% in

fiscal 2019 to 10.04% in fiscal 2020 primarily due to re-pricing of existing
floating rate loans at higher rates and incremental lending at higher rates due
to an increase in MCLR during fiscal 2019. The Bank’s 1-year MCLR increased
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

by 50 basis points between April 2018 and March 2019. However, the Bank
reduced the 1-year MCLR by 65 basis points in phases during fiscal 2020, the
full impact of which will be reflected in the next fiscal.
The yield on overseas advances decreased by 38 basis points from 4.41% in
fiscal 2019 to 4.03% in fiscal 2020. The yield on net advances was higher in
fiscal 2019 primarily due to higher interest collection on NPAs. The overall
yield on average advances increased by 49 basis points from 8.96% in fiscal
2019 to 9.45% in fiscal 2020 primarily due to an increase in proportion of
domestic advances in total advances.

- The yield on average interest-earning investments increased by 4 basis points

from 7.08% in fiscal 2019 to 7.12% in fiscal 2020. The yield on Statutory
Liquidity Ratio (SLR) investments decreased by 14 basis points from 7.24% in
fiscal 2019 to 7.10% in fiscal 2020 primarily due to investment in government
securities at lower yields and reset of interest rates on floating rate bonds at
lower levels. The yield on non-SLR investments increased by 63 basis points
from 6.56% in fiscal 2019 to 7.19% in fiscal 2020 primarily due to an increase
in yield on pass through certificates and an increase in average investment in
pass through certificates and bonds and debentures which are relatively
higher yielding, offset, in part, by a decrease in yield on commercial papers
and certificate of deposits.

- The yield on other interest-earning assets decreased from 3.63% in fiscal 2019
to 3.31% in fiscal 2020 primarily due to a decrease in interest on income tax
refund, an increase in average balance with RBI and a decrease in yield on LAF
lending and Rural Infrastructure Development Fund (RIDF) and related
deposits, offset, in part, by an increase in interest
income on funding swaps. Interest on income tax refund decreased from INR
4.48 billion in fiscal 2019 to INR 2.70 billion in fiscal 2020. The receipt, amount
and timing of such income depends on the nature and timing of
determinations by tax authorities and are hence neither consistent nor
predictable.
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

Expansion Plans / other major initiatives planned, as indicated in the

Annual Report
Digitalization is core to ICICI’s strategy of integrating across ecosystems, smooth
onboarding and transactions, growth in liabilities and analytics for risk selection.
The remarkable growth in profit, despite the ongoing COVID-19 crisis is largely
catalyzed by digital banking initiatives, undertaken by ICICI (currently is India’s second
largest private lender), to deliver a secure, fast and seamless banking experience to its
customers.
The adoption of digital transformation at ICICI Bank predates the COVID-19 pandemic.
The Bank has always been committed to enhancing customer experiences with
innovative digital banking solutions.
ICICI has continued to enhance our digital delivery with a range of new offerings and
solutions.

ICICI Bank’s newly launched services and platforms such as video KYC and WhatsApp
banking enjoy immense popularity among customers, as is substantiated by an increase
in the uptake of these solutions.
In September 2020, the Bank used video KYC to onboard about 35% of salary account
customers and 31% of credit card customers. This convenient onboarding process has
also contributed to an increase in credit card spends to about 85% of pre-COVID levels.
The recovery in retail loan growth up to pre-COVID levels with a 13% y-o-y growth can
be credited largely to seamless onboarding processes and digital sanctions. In fact,
about 53% of personal loans and about 74% of credit card customers have been
acquired through digital channels in H1-2021.
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

ICICI introduced new features on its WhatsApp banking platform which enable
customers to open fixed deposits, pay utility bills and get access to trade finance details
instantly. At present, about 2 million ICICI Bank customers use WhatsApp banking.
The high deposit growth recorded in this quarter (20% y-o-y increase in total deposits
and a 18% growth in average CASA deposits) can also be credited to these efficient
online banking services, among other factors.

ICICI has also leveraged digital technologies to offer a host of solutions to

entrepreneurs.
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

During Q2 FY21 ICICI launched the iStartup 2.0 programme, which enables startups to
open current accounts digitally and instantly at the time of incorporation.
The platform provides essential banking and non-banking services as well as customized
features, required by entrepreneurs to grow their businesses digitally. The Bank also
rolled out additional digital initiatives such as forex on mobile through its InstaBIZ app
for small business customers.

Despite the ongoing COVID-19 crisis, Q2 FY21 also saw a promising 18% y-o-y increase
in the core operating profit of the bank, to ₹ 7,719 crore in Q2-2021 from ₹ 6,533 crore
in Q2-2020.
The numbers are testament to the success of leadership and ICICI Bank’s
implementation of digital banking solutions to deliver best-in-class, tech-enabled
products and pave the way for uninterrupted growth in the new digital economy of the
future
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

Enabling partners to integrate various payment and product solutions in few days; APIs
available across an arrays of categories including payments & collections.

ICICI’s DIGITAL ROADMAP

- Interaction of partners, business groups and technology groups

- Equity investment into high growth and disruptive fintech startups
- Active engagement with startups
- Experiment with internal team of techno-preneurs
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

Market share of 28% in UPI P2M transactions in June 2020; ranked 2 nd in the industry

ICICI Bank was the first bank to launch and implement an inter-operable Electronic Toll
Collection (ETC) platform on national highways
Pioneer in FASTag program by onboarding state highways.
Market leader with share of 38% by value in July 2020.
Overall Performance / Financial Strength
The strategic focus of the ICICI Bank during fiscal 2020 was to continue to grow its core
operating profits in a risk-calibrated and granular manner. This was driven by the
objective of ‘One Bank, One ROE’, that enabled synergies across businesses. Further, the
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

principle of 'Fair to Customer, Fair to Bank' emphasising the need to deliver fair value to
customers while creating value for shareholders, guides the Bank’s operations. The
underlying pillars of leveraging digital, a customer-centric and service-oriented
approach, simplification of processes and enhancing customer experience were factors
that were common across all businesses.

Net Interest Margin. It is the difference between the interest income generated and
the amount of interest paid out to their lenders (deposits), divided by total assets.
It is similar to the gross margin of non-financial companies. An ideal financial company
should have NIM above 3%.
ICICI Bank is maintaining the profitability ratio at end of FY-20 at 3.73% which is an
indicator of a strong performance.
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

Loan to Deposit ratio (Credit to deposit) also known as LTD is commonly used to
assess the bank's liquidity. It is calculated by dividing the bank's total loans(advances) by
its total deposits. If the ratio is too high, it means the bank might not have enough
liquidity to cover any unforeseen fund requirements. LTD above 100% is not healthy. If
customers begin to pull deposits, the bank might be suddenly strapped for cash.
ICICI has its LTD at 88.19% at end of FY-20 which shows the health of the bank in terms
of liquidity coverage.

Financial leverage ratio also known as financial leverage or leverage is a measure of

how much assets a company holds relative to its equity. A high leverage ratio means
that the company is using debt and other liabilities to finance its assets. Leverage is a
double-edged sword. The most obvious risk of leverage is that it multiplies losses. A
bank that borrows too much money might face bankruptcy during a business downturn,
while a less-levered bank might survive. 
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

Financial Leverage ratio of ICICI at end of FY-20 was 10.61 which is an aggressive
number, but COVID19 was a tough time for the sector, and now ICICI is on the road to
recovery and the Financial Leverage ratio should be in control. The leverage ratio of
Lehman Brothers in 2007 was 30, no wonder it declared bankruptcy during the
downturn.

Borrowings to Networth Ratio: The higher the ratio, the greater risk will be associated
with the firm. A lower ratio generally indicates greater long-term financial safety. A firm
with a low borrowing/networth ratio usually has greater flexibility to borrow in the
future. A highly leveraged company has a limited debt capacity and the huge debt
becomes a huge liability during a recession. Total borrowings include long-term debt,
short-term debt and bank overdraft. Borrowings to Networth above 150% is not healthy.
Borrowings to Networth Ratio is ICICI bank was at 164.8% at the end of FY-20, which
certainly is not at optimum level, but their strategy and growth plan will help ICICI bank
lower the ratio in coming years.
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

Net Income & Cash from Operations: Operating cash flow is a better metric of a
company's financial health for two main reasons. Cash flow is harder to manipulate than
net income (although it can be done to a certain degree). Second, "cash is king", a
company that does not generate cash over the long term is on its deathbed. Investors
can avoid a lot of bad investments if they analyze a company's operating cash flow.
Net Income (Income Statement) and Cash from operations (Cash Flow Statement)
should ideally be parallel. A consistently falling or negative operating Cash Flow(OCF)
despite a rising net profit is a cause for concern because of aggressive accounting
techniques or high working capital requirements.
ICICI Bank has been maintaining their Operating Cash Flow higher than their Net
Income since FY-16, with a substantial improvement at the end of FY-20 (Operating
Cash Flow was INR 795.65 Billion and Net Income was INR 95.66 Billion).
 SCMHRD – Batch: 2019-2022 – PRN: 19020348002 – Name: Ajinkya Yadav

Overall performance is a generic indicator of any organisation which

facilitates/influences your decisions towards that organisation.
ICICI Bank has show sustainable YOY growth in terms of Revenue & Gross Profits,
despite the COVID19 phase ICICI has posted net profit of INR 95.66 Billion.

END OF REPORT

THANK YOU
AJINKYA YADAV
PRN: 19020348002
MBA (Ex) Finance
SCMHRD – 2019-2022