STRATEGIC IMPLEMENTATION:

Company analysis on ICICI Bank

What is Bank Today?
 The current banking scenario is greatly different from
the past.
 Capital is going to play a crucial role in the
banking sector.
 Only 15 to 20 years ago, most Western banks generated
90% of revenue from interest income. Now this
percentage has fallen to 60%, sometimes as low as
40%.
 The concept of banking is being modified and the
traditional barriers among financial service sub
industries (retail banking, private banking, investment
banking, asset management, insurance, etc.) are
vanished.

GLOBAL BANKING
The common trends resulted in pace of


dramatic change for banking are:

 The focus of banking is shifting from
transactions management toward sales of
financial products.
 Barriers to entry for the retail banking
segment are being lowered.
 The growing variety of delivery channels for
banking enables new entrants to thrive.
 Challenges faced by Global banks are:
 Credit
Crises
 Hedge Funds
 Money laundering
Factors affecting global banking industry
 A slowing population growth and increasing
average life expectancy and per capita
income.
 The growing importance of a clear strategic
intent in the banking industry.
 The technological breakthrough caused by
the eruption of e-banking and e-finance.
 Worldwide consolidation and consequent
restructuring.
 Increasing competition in terms of both
markets and products.
 “Contamination” among different industries.


CONSOLIDATION
 To take advantage of economies of scale.
 ForE.g.:-the merger between the Swiss banks
UBS and SBC creating one of the largest
banks in the world.
 To have access to distribution channels.
 To widen the range of products that the bank
can offer both actual and potential clients.
 For E.g..:-between Citibank and Travelers, has
originated Citigroup.
 To enter a new geographic market.

Aftermath of global crisis
 IMF warns that world economy development
could decline to its lowest point ever since
World War II to just 0.5% this year.
 In USA the interest rate has been cut hugely
by the Federal Reserve from the 5.25% to
0.25%.
 In UK pound was at a 23-year low against the
dollar.
 The Bank of England has cut interest rates to
a record low of 1% -the lowest level in its
315- year history.



Stimulus Packages across the
Globe....
 The US Congress passed a stimulus package
worth $ 838 billion, aimed at creating
millions of new jobs and steering the
economy out of the recession.
 China announced a huge economic stimulus
package of an estimated $586 billion.
 Japan announced $100bn to curb recession.

 Germany announced $63bn.


Indian Bank Scenario
 India’s banking sector, currently ranked
among the most preferred banking
destinations in the world
 Stupendous growth in profits, however rise in
NPAs may remain a key challenge”
 India's financial sector is undergoing a
consolidation phase with the
implementation of Basel II norms which
was started in April 2009.
 Strong Regulatory System

 RBI road map for foreign player’s

 Approximately 74 per cent of holdings of

ICICI and HDFC bank are in the hands of
Indian Bank Scenario
 Indian Banks go global
 Robust risk management practices

 Advanced technology

 Skilled manpower

 Very sound marketing practices.

 As per RBI PSU banks in India will require an

amount of Rs 2980 billion of additional
capital
 CRAR of 12 per cent by March 2010

 Post 2009 entry of new players will intense

the competition for domestic banks.
Indian Bank Scenario
 Key areas are trade finance, institutional
banking, corporate and investment banking
 Improve branding of domestic banks by
improving various parameters
 Human expertise is minimum in derivatives

 Risk Management to be key area.

 Post 2009 in the areas of retail banking also

the PSU banks will face great hurdle.



Indian Bank Scenario Statistics
 The banking sector index has grown at a
compounded annual rate of over 51 per
cent since the year 2001.
 Sector has the potential to account for over
7.7 per cent of GDP with over Rs.7,500
billion in market cap
 To provide over 1.5 million jobs.
Key Statistics
 The net NPAs of PSBs also registered a
relatively smaller rise of 28.83 % against
the whopping increase of 43.84 % in the
net NPAs of private sector banks.
 PLR rates of PSU’s higher than private banks

 The credit flow from the public sector banks

has increased substantially from 19.8 % as
 On the other hand private banks witnessed
steep fall in credit flow from 24.2 % to 11.8
%
 Retail banking sector expected to grow at a
rate of 30%
Key Statistics
 Despite registering a healthy rise of 51.9 % in
their bottom line, Net non-performing assets
(NPAs) of 25 banks have risen by an average
34.5 % in Q3 FY ’09 as against Q3 FY’08.
 The average capital adequacy ratio (CAR) of 25
banks slipped marginally to 13.22 % in Q2-FY
‘09 from 13.39 % in the previous year.
 The public sector bank’s bottom line grew by an
average 57.29 % in the third quarter of the
fiscal as compared to private sector banks’
43.88 %
 Absolute gross non-performing loans (NPLs) for all
Indian banks increased by 22.5% compared
with 11.9% in the previous year.

ICICI Bank: An Introduction
 India's largest private sector bank.

 Formerly Industrial Credit and Investment

Corporation of India

 The Bank has a network of 1,520 branches and about

4,721 ATMs

 Its present in 18 countries with more than 25 million

customers worldwide

 ICICI Bank is one of the Big Four Banks of India

with State Bank of India, Axis Bank and HDFC Bank


Vision
 To be the leading provider of financial services
in India and a major global bank.
Mission
We will leverage our people, technology, speed and


financial capital to:

 be the banker of first choice for our customers by
delivering high quality, world-class products
and services.
 expand the frontiers of our business globally.
 play a proactive role in the full realisation of
India’s potential
 maintain a healthy financial profile and diversify
our earnings across businesses and
geographies
 maintain high standards of governance and
ethics
 contribute positively to the various countries and
markets in which we operate
 create value for our stakeholders
Achievements of the bank in the
industry
 Introduced concept of branding.
 Process, People and Physical evidence –

Hum Hain Na
brought to life by ICICI.
 Product Innovation – Put the ‘customer first’.

 Cash on the celebrity fever.

 Introduction of DSA’s and DST’s.

 Unleashed the power of the internet –

introduced the concept of net banking and
e-mail marketing.
 First bank to focus on retail banking as a
driver for growth.
 Comprehensive data centre availability &
data protection solutions.
Critical Success Factors
 India’s largest private sector bank and
second largest in terms of assets.

Hum Hain Na
 Strong bank network with 1400 branches and
4530 ATMs pan India.
 International presence in 18 countries.

 Complete range of financial services to both

corporate bankers and retail customers.
 Ratio of fee income to total income higher
than Indian Banks and comparable to
global banks.
 Largest provider of retail credit in India.

 Involved in 75% outbound mergers and

acquisition deals from India.
Product Portfolio
Personal Banking
 Deposits.
 Loans.

 Investments.

 Cards.

 Insurance.

 Online Services.

 Wealth Management, Forex Services and

Demat Services.
NRI Banking
 Money Transfer.
 Bank Accounts.

 Investments.

 Property Solutions.

 Insurance.

 Loans.
Corporate Banking
 Corporate Net Banking.
 Cash Management.

 Trade Services.

 FXOnline.

 SME Services.

 Online Taxes.

 Custodial Services.

 Agri/Rural Business Banking.


Geographic Presence
 The Bank is expanding in overseas markets and
has the largest international balance sheet
among Indian banks.
 ICICI Bank now has wholly-owned subsidiaries,
branches and representatives offices in 18
countries, including an offshore unit in Mumbai.
 Wholly owned subsidiaries in Canada, Russia and
the UK (the subsidiary through which the
HiSAVE savings brand is operated), offshore
banking units in Bahrain and Singapore, an
advisory branch in Dubai, branches in Belgium,
Hong Kong and Sri Lanka, and representative
offices in Bangladesh, China, Malaysia,
Indonesia, South Africa, Thailand, the United
Arab Emirates and USA.
ICICI BANK Financials: Balance Sheet
Balance Sheet (Contd…)
Profit and Loss
Profit and Loss (Contd…)
Cash Flow Statement
Key Ratios
Competitor Comparison
Strengths
 India’s second-largest bank by total assets, with a
network of over 1548 branches and offices, and
over 4816 ATMs only behind State Bank of India
 As of March 2009, it had an asset base of INR
3793 billion reflecting its large scale of
operations
 The company’s strong position in the Indian
market gives it significant brand recognition,
leveraging which the bank could gains
competitive advantage over its peers
 The Bank’s capital adequacy at September 30,
2009 as per Reserve Bank of India’s Basel II
norms was 17.7% and Tier-1 capital adequacy
was 13.3%, well above RBI’s requirement of
total capital adequacy of 9.0% and Tier-1
Weaknesses
 Fee based Income and Income from Investments has
reduced by 6.5% from Mar-09 to Sep-09 while it
has reduced by 3.7% since Sep-07
 Other Income for SBI has grown by 123% since Sep
07.
 Hence, it is a major contributor to the Total Income
along with low Investment requirement
Opportunities
 Decrease in Housing Loan Interest Rates and reducing
prices of Real Estate will lead to an increase in
demand for Housing Loans
 The private equity market in India attracted $7.3
billion in investment capital in 2009 and it is
expected to reach up to $50 billion in 2012
 Private equity investments in India are expected to
remain based on the traditionally smaller growth-
capital investments.
 ICICI bank provides venture capital funding to start-up
companies and private equity to a range of
companies through funds managed by its
subsidiary ICICI Venture Funds.
Organisation Structure
o Retail Banking Group
o Rural, Micro banking and Agri Business Group
o Wholesale Banking Group
o International Banking Group
o Global Markets Group
o Corporate Centre
o Human Resource Management Group
o Global Operations and Middle Office Groups
o Organization Excellence Group
o Technology Management Group
o Global Infrastructure and Administration Group

Organization Structure
 Fiscal 2009 – Unprecedented Volatility. High
inflation and interest rates
 2nd half impacted by global financial and
liquidity crisis and loss of business
confidence
 Focus of bank on capital conservation,
liquidity management and risk containment
 Increasing branch network to garner low cost
and retail deposit base

Strategies
 Retail Strategy – Focus on risk containment
o Tightening of lending norms
o Increasing CASA Deposits (26.1 % to 28.7%)
o Expanding branch network (755 to 1419)
o Cross selling products (eg: life and general insurance of
subsidiary companies) to existing customers
o Creation of concept of DSA (Direct Selling Agent) & DST
(Direct Selling Team)
o Effort on the part of the bank to reach the customer
rather than waiting for the customer
 Small Enterprises
o Cluster Banking approach followed
o Bouquet of small business banking products and
investment banking and advisory services
o Initiatives like SMERA (Credit rating), “SME
Dialogue”(Sharing success stories), “ SME CEO
Knowledge Series”

ICICI’s focus on inward remittances has
resulted in major dividends for the bank
 Corporate Banking
o Providing comprehensive and
customized financial solutions
o Maintaining relationships with all of
the country’s corporate houses
o Product specific teams to focus on
specific areas of expertise in
designing financial solutions for
clients
 International Banking
o Building of retail deposit franchise,
meeting foreign currency needs of
corporate clients
o Focus on meeting foreign currency
needs of Indian corporate for
overseas and domestic expansion
o ICICI discovered that, in India, there
is a large untapped rural market
which lacks awareness of financial
services as well as convenient
access to remittance delivery
services
 Rural and Agri-Business
o Strategy to not only increase finance in this sector but also
the ability to mitigate risks by offering micro savings,
investment and insurance products
o Launch of Kisan Credit Card – Adequate and timely support
to farmers under single window with flexible and
simplified procedures
 Life Insurance sector Strategy
o Life insurance market expected to see revival in
growth in second half of FY2010 (first half would be
impacted by high base effect)
o ICICI Life: focus on consolidating position as largest
private sector life insurer, while maintaining new
business profit margins and reducing expense ratio
o General insurance sector continues to witness impact
of detariffing
o ICICI General: focus on maintaining market share and
leadership, while maintaining underwriting
profitability and reducing expense ratio
Use of IT for rapid Business expansion and transformation
has always remained a key strategy for ICICI

 Information Technology
 Used as a strategic tool to
gain competitive
advantage
 Also leads to increased
productivity and efficiency
 Systems capable of
handling high customer
and transaction volumes
 Focus on investments in
technology to create new
business offerings,
improve performance and
optimise costs
 Some initiatives- Service
request automation,
enhanced use of SMS
alert platforms, self
Michael Porter’s Five Forces Model
Competitive Rivalry
 In 2008 – 09 HDFC Bank almost doubled its
branch network through organic as well as
inorganic growth route
 ICICI Bank has partnerships with foreign
banks like Lloyds Bank in UK and Wells
Fargo in US in order to use new delivery
channels and leverage technology to an
end use
 Apart from streamlining their processes
through technology initiatives such as
ATMs, telephone banking, online banking
and web based products, banks also
resorted to cross selling of financial
products to augment their fee based
Bargaining Power of Customers
 For good creditworthy borrowers bargaining
power is high due to availability of large
number of Banks

BARGAINING POWER OF SUPPLIERS
Fo r go o d c re ditwo rthy bo rro we rs bargaining 
po we r is high due  to  availability o f large  
numbe r o f BanksTrade  unio ns in public  se c to r 
banks c an be  anti re fo rms
De po sito rs may inve st e lse whe re  if inte re st 
rate s fall

Threat of New Entrants
 Foreign players, NBFCs and other private
banks
 Due to financial reforms and widening of
priority sector norms

THREAT OF SUBSTITUTES
Substitute s in Banking o pe ratio ns is no t 
po ssible , ho we ve r o the r financ ial pro duc ts 
like  insuranc e , mutual funds, c re dit c ards e tc . 
do  have  the  thre at o f substitutability by 
NBFCs
Value Chain Analysis
Value Chain Analysis: ICICI Bank

Focus on  Use of  The interest  Marketing  Extensive 

Low cost  information  margins  oriented  ATM network 
CASA  technology  charged by  and the first  providing 
deposits to reduce  ICICI is  to use brand  better service.  
operation  slightly  ambassador ATMs in 
costs higher s villages
BCG Matrix

Online Services Bank Accounts

Corporate Net Investments
Banking
Online Taxes

Property Solutions
Deposits Insurance
Loans
Strategies for Way ahead
 Increase Net interest margin.
 Leverage both international and domestic
growth by increasing commercial
borrowings.
 Capture the CASA market share as that will
help get approval from RBI for branch
expansion.
 Check dependence on high cost wholesale
deposits.
 High fee income ratio has also led to
exposure to complicated, structured
derivative products both India and
overseas.