ICICI Bank Results FY 08 Performance - by Narasimhan
ICICI Bank announced its results for the year ended FY 08 on the March 31, 08 recently. The profits were up at Rs. 41.58 Billion, an increase of over 39% on the past year profits of Rs. 31.1 Billion. The increases in net interest income and fee income were muted at 30% (Rs. 73.04 Billion) and 32% (Rs. 66.27 Billion) respectively. The bank achieved a good increase in CASA as the current account and savings account deposits went up to 26% of the total deposits in FY 08 from the 22% of the FY 07 deposits. The deposit growth of 27% over the previous year was higher than the banking sector growth enabling the bank to gain more share of business. The outlets increased by a third as it had absorbed the Sangli bank operations into its fold. There was also good increase in ATMs which stand at 3950, aiding the branch banking activities substantially and improving the client market reach. The credit growth slowed to 19% and the total advances stand at Rs. 25.2 Trillion. Fee income recorded good growth as the international operations expanded, the bank become number one provider of off shore syndicated loans. The bank achieved a capital adequacy of 13.97%, a very comfortable when seen from Basel II requirement of 12% and RBI’s norm of 9%. The subsidiaries catering to UK and Canadian market are over capitalized at 18.6% and 22.9% leaving good scope to increase share holder’s return. It is good to note that the bank has 1.49% of its assets under non-performing category and therefore does not have pressure from bad debts so far.
What the investors can look forward to?
With an election to Indian parliament scheduled to take place in FY 09, the monetary policies will be tempered by lower expansion and at higher rates of lending. The investors can expect enlarging of interest spreads. However the impounding of cash by RBI, other measures to reduce credit expansion to stem demand quantum in the economy is likely to impact the banking sector’s fortunes. Therefore, ICICI bank can at best match the growth posted in the current year. It is unlikely that the stock market will look to banking stocks as safe bets. The increasing interest spreads are likely to leave banks with higher provisioning. The strong recovery method of the bank is expected to help ICICI manage the bad debts from impacting the results.
Investors may consider retaining their holdings and getting fresh exposure at lower levels if prices decline.