ICICI Bank Q2 net up 30%

October 24, 2006: Performance Review "� Quarter ended September 30, 2006: 30% year-on-year growth in profit after tax. The Board of Directors of ICICI Bank Limited (NYSE: IBN) at its meeting held at Mumbai today, approved the audited accounts of the Bank for the quarter ended September 30, 2006 (Q2-2007).

Highlights

Operating profit excluding treasury income increased 65% in Q2-2007 to Rs. 1,325 crore (US$ 288 million) from Rs. 804 crore (US$ 175 million) in the quarter ended September 30, 2005 (Q2-2006).

Operating profit increased 54% to Rs. 1,612 crore (US$ 351 million) in Q2-2007 from Rs. 1,044 crore (US$ 227 million) in Q2-2006.

Profit after tax for Q2-2007 increased 30% to Rs. 755 crore (US$ 164 million) from Rs. 580 crore (US$ 126 million) for Q2-2006.

Net interest income increased 47% to Rs. 1,577 crore (US$ 343 million) for Q2-2007 from Rs. 1,070 crore (US$ 233 million) for Q2-2006.

Fee income increased 62% to Rs. 1,138 crore (US$ 248 million) for Q2-2007 from Rs. 704 crore (US$ 153 million) for Q2-2006.

Profit after tax increased 24% to Rs. 1,375 crore (US$ 299 million) for the six-month period ended September 30, 2006 (H1-2007) from Rs. 1,110 crore (US$ 242 million) for the six-month period ended September 30, 2005 (H1-2006).

Retail assets increased 57% to Rs. 107,679 crore (US$ 23.4 billion) at September 30, 2006 from Rs. 68,537 crore (US$ 14.9 billion) at September 30, 2005.

Deposits increased 57% to Rs. 189,499 crore (US$ 41.3 billion) at September 30, 2006 from Rs. 120,452 crore (US$ 26.2 billion) at September 30, 2005.

Operating review

Credit growth

The Bank's net customer assets increased 47% to Rs. 163,785 crore (US$ 35.7 billion) at September 30, 2006 compared to Rs. 111,514 crore (US$ 24.3 billion) at September 30, 2005. The Bank maintained its growth momentum and market leadership in the retail segment. In H1-2007, the Bank's total retail disbursements were about Rs. 33,500 crore (US$ 7.3 billion) including home loan disbursements of about Rs. 13,400 crore (US$ 2.9 billion). Retail assets constituted 69% of advances and 66% of customer assets. The Bank is focusing on non-fund based products and services, as well as capitalising on opportunities presented by the domestic and international expansion of Indian companies. The Bank is also extending its reach in the small and medium enterprises segment.

Rural banking

The Bank is rolling out its rural strategy, providing a comprehensive product suite encompassing credit, transaction banking, deposit, investment and insurance, through a range of channels. The Bank is focusing on rural retail lending for productive purposes, as well as rural infrastructure. The Bank's rural retail delivery channels include its own branches, as well as various partnerships, including micro-finance institution (MFI) partners. The Bank has also initiated banking correspondent models. The Bank's rural portfolio grew by about 70% on a year-on-year basis.

International operations

The Bank now operates in 14 countries through branches, representative offices and wholly-owned subsidiaries. During the quarter, the Bank's Canadian subsidiary opened its sixth branch and the Bank opened a representative office in Indonesia. The loan portfolio of the Bank's international branches (including foreign currency financing to Indian companies) increased to about Rs. 15,000 crore (US$ 3.3 billion) at September 30, 2006 from Rs. 9,600 crore (US$ 2.1 billion) at September 30, 2005.

The loan portfolio of the Bank's international banking subsidiaries (including foreign currency financing to Indian companies) increased to about Rs. 9,400 crore (US$ 2.0 billion) at September 30, 2006 from Rs. 4,100 crore (US$ 0.9 billion) at September 30, 2005. The Bank's remittance volumes grew by 74% in H1-2007 compared to H1-2006. The Bank has launched remittances services to Sri Lanka and the Philippines through its UK and Canada subsidiaries. ICICI Bank UK's unaudited profit after tax of for H1-2007 was US$ 16.1 million (approximately Rs. 74 crore), translating into a return on equity of 21%.

Capital adequacy

The Bank's capital adequacy at September 30, 2006 was 14.3% (including Tier 1 capital adequacy of 9.4%), well above RBI's requirement of total capital adequacy of 9.0%. The Bank's unaudited capital adequacy estimated based on RBI's draft guidelines issued in February 2005 on implementation of the revised capital adequacy framework (Basel II), was about 14.9% (including Tier 1 capital adequacy of about 10.5%) at September 30, 2006.

Asset quality

At September 30, 2006, the Bank's net non-performing assets constituted 0.9% of customer assets against 1.0% at September 30, 2005. The Bank's net restructured loans at September 30, 2006 were Rs. 4,942 crore (US$ 1.1 billion), down from Rs. 5,713 crore (US$ 1.2 billion) at September 30, 2005.

Key domestic subsidiaries

ICICI Securities achieved a profit after tax of Rs. 35 crore (US$ 8 million) in Q2-2007. ICICI Lombard General Insurance Company (ICICI Lombard) enhanced its leadership position with a market share of 35% among private sector general insurance companies and an overall market share of 12% in H1-2007. ICICI Lombard's unaudited profit after tax for Q2-2007 was Rs. 18 crore (US$ 4 million).

ICICI Prudential Life Insurance Company (ICICI Prudential Life) continued to maintain its market leadership among private sector life insurance companies. Life insurance companies worldwide make losses in the initial years, in view of business set-up and customer acquisition costs in the initial years as well as reserving for actuarial liability. While the growing operations of ICICI Prudential Life had a negative impact of Rs. 112 crore (US$ 24 million) on the Bank's consolidated profit after tax in Q2-2007 on account of the above reasons, the company's unaudited New Business Achieved Profit (NBAP) for Q2-2007 was Rs. 161 crore (US$ 35 million) as compared to Rs. 100 crore (US$ 22 million) in Q2-2006. NBAP is a metric for the economic value of the new business written during a defined period. It is measured as the present value of all the future profits for the shareholders, on account of the new business based on standard assumptions of mortality, expenses and other parameters. Actual experience could differ based on variance from these assumptions especially in respect of expense overruns in the initial years.

Prudential ICICI Asset Management Company continues to be among the top two asset management companies in India with assets under management of over Rs. 30,000 crore (US$ 6.5 billion) at September 30, 2006.