Performance Review

May 3, 2002

Agenda
ICICI Bank today

Retail banking
Corporate banking & structured finance

Merger process
Financial performance

ICICI Bank today

Large capital base

Vast talent pool

Low operating costs Technology focus Strong corporate relationships

Indias largest private sector bank and one stop financial solutions provider with a diversified and de-risked business model

ICICI Bank today (contd.)

Diversified portfolio
March 2001- Proforma merged March 2002- Merged
5% 7% 23%

33%

Pro ject finance Co rp o rate finance Retail finance

12% 4% 12% 3% 36%

Reserves & cash Investments Other assets

34% 8% 23%

Rs. 931.50 billion

Rs. 1,041.10 billion

the asset composition change on account of statutory requirements and increase in retail assets is contributing to de-risking the portfolio
4

ICICI Bank today (contd.)

De-risked portfolio

Capital adequacy ratio of 11.44% Net NPA ratio of 4.7% Fair valuation adjustment of Rs. 37.80 billion
(Rs. in billion)

Gross book Existing Fair value Total Coverage value provision provision provision Non-performing 69.18 34.66 9.02 43.68 63.1% loans Other loans 476.36 2.19 19.53 21.72 4.5% Mark-to-market of investments 9.25 Total fair valuation adjustment 37.80

ICICI Bank today (contd.)

ICICI Bank is well positioned to redefine the banking model by focussing on the untapped potential in the profitable retail business segments and leveraging its superior delivery capabilities and lower operating costs in the underserved corporate banking business

Retail banking

Corporate banking

Structured finance

Contents
ICICI Bank today

Retail banking
Corporate banking & structured finance

Merger process
Financial performance

Size
500 400

Retail loan disbursements

CAGR 32%
350.00 450.00

(Rs. in billion)

220. 00 300 200 100 130. 00 0 2000

ICICI estimates 260.00

180. 00

130. 00 230. 00

170. 00

2001 Mortgages Other retail loans

2002

Despite the fast growth, the Indian retail market continues to be under-penetrated in comparison to its peers

Benchmarking
Consumer loans outstanding (USD in billion)

800 700 600 500 400 300 200 100 0 India Thailand Malaysia Taiw an Korea 2% 17% 34% 53% 54%

75%

80% 70% 60% 50% 40% 30% 20% 10% 0%

USA

Total consumer loans outstanding Consumer loans outstanding / GDP (% )

Source: Salomon Smith Barney

The under-penetration is reflected even within the subsegments

9

Consumer loans outstanding / GDP (%)

Benchmarking (contd.)
Consumer loans / Total loans
58.0%
USA - 51%

Mortgages / GDP

37.0%

36.0% 26.0% 8.0% 13.0%

1.0% 9.0% 13.0%

17.0%

India Thailand India Thailand

Malaysia Taiw an Taiwan M alaysia

Korea Korea

India India

Thailand Thailand

Korea M alaysia Taiw an Korea Malaysia Taiwan

Credit cards / Population

121.9%
USA - 235%

Other retail loans / GDP

41.0%

82.4%

USA - 24%
16.0% 17.0% 8.0% 0.8%

0.4%

2.8%

9.8%

India India

Thailand Thailand

Malaysia Taiwan M alaysia Taiw an

Korea Korea

India India

Thailand Taiw an Thailand Taiwan

M alaysia Malaysia

Korea Korea

Source: Salomon Smith Barney

Indias retail market is at a nascent stage and is expected to grow rapidly on account of the current trend in upward migration of household income levels
10

Household segment migration

No. of households (million)
CAGR 48%
6.8
22.9

2.1

1996 Rich (> Rs. 0.5 mn p.a.) Mass (Rs. 0.1-0.3 mn p.a.)

1999

2002

Mass affluent (Rs. 0.3-0.5 mn p.a.)

Source: 1996, 1999 data is from NCAER study for top 24 cities, 2002 data is estimated by ICICI Bank 11

ICICI Banks strategy to capture retail potential

Strong corporate relationships

Achieving leadership in retail financial services

Brand

Technology

the core of this strategy is our relentless focus on the customer and crossselling of products
12

Operational excellence

Catalyzing cross-sell

Internet Banking

Call Centers

500 Outlets

1005 ATMs

Customized cross-selling by leveraging relationships, brand and technology

Fixed deposits Power Pay

Bonds Consumer loans

Life insurance Auto & home loans

Health insurance Credit & debit cards

13

Operational excellence
Prudent credit policies

Bolstered by a company wide 6 sigma initiative

Adequate fraud control

Rigorous collection mechanism

These measures have ensured that we have followed a cautious approach while maintaining high growth rates and profitability in all segments
14

Our growth in retail (contd.)

80 70 60 50 40 30 20 10 Outstanding loans
Growth rate 167% 79.86

Home loans grew at

5 1 .3 4
30.73

2 2 .1 2
5.15

8 .6 1

2 8 .5 2

230% in FY 2002 Amongst the leading providers of home loans in India Other retail loans grew at 130% in FY 2002

(Rs. in billion)

2000 2001 2002 Ho m e lo ans Other retail lo ans

Home & others

Bank accounts

Credit cards

15

Our growth in retail (contd.)

Int e rne t ba nk ing c us t o m e rs B a nk c us t o m e r a c c o unt s

5 4 3 2 1
0 .3 0 .1

5 .0

Bank accounts grew

(million)

3 .2

at 53% in FY 2002 Internet customer accounts grew at 100% in FY 2002

Comprised 25% of

bank accounts
1 .2 0 .6 0 .6

Among top twelve

1999 2000 2001 2002

internet banks in the world

Home & others

Bank accounts

Credit cards
5.0

16

Our growth in retail (contd.)

N um be r of cre dit cards

0. 8
Growth rate 100%

0.6

(million)

0. 5
0.3

0. 3

2000 2001 2002

Home & others

Bank accounts

Credit cards

17

In summary
Mortgages

Other retail loans

Credit cards

Nascent ICICI Bank analysis -

Developing

Matured

Commoditized

For mortgages & other retail loans: Nascent <1% of GDP, Commoditized >30% of GDP. For credit cards: Nascent <0.1% penetration, Commoditized > 50% penetration

We entered the retail market at the beginning of the growth stage and are now harnessing the untapped potential in all the profitable business segments

18

Contents
ICICI Bank today

Retail banking
Corporate banking & structured finance

Merger process
Financial performance

19

Corporate banking and structured finance

Maximize

value of client relationships technology to

Leverage

enhance

delivery

Strategy

capabilities
Proactive

portfolio management

For efficient capital utilisation and lower balance sheet exposure

The aim is to provide state-of-the-art, low cost and efficient banking services, with a focus on increasing fee-based income
Corporate Banking Structured Finance

20

Corporate banking and structured finance

Grow

market share in fee-based products and services

4% 51%
Corporate Retail

Fee market size

13%

Government Forex Overseas branches

14% 18%

Market size: Rs. 111.10 billion

Corporate Banking

Structured Finance

21

Corporate banking and structured finance

Corporate

Solutions Group

Reach the entire universe of current and potential clients (over 1300) and offer tailor-made solutions

Government

Solutions Group

Strategy

Develop comprehensive banking relationships with all central, state and local governmental entities

Small

& Medium Enterprises Group

Develop comprehensive banking relationships with small & medium sized enterprises leveraging corporate linkages Focus on agri-lending to help in compliance with priority sector norms

Corporate Banking

Structured Finance

22

Corporate banking and structured finance

Leverage

Strategy

expertise to facilitate loan origination and ensure sell down leading to Reduced concentration of risk Optimal risk-return trade-off pursue cross-sell opportunities for all ICICI group products

Aggressively

Significant opportunities for funding well-structured projects with in-built risk mitigation Corporate Banking Structured Finance

23

Corporate banking and structured finance

Infrastructure

Projects Group

Create a balanced portfolio across sub-sectors

Telecom, Power, Transportation, Urban Infrastructure

Strategy

Focus on non-fund based activities

Manufacturing

Projects Group

Consolidation and modernization in core sectors

Cement, Steel, Textiles, Chemicals Oil & gas, Mining, Retail, Agri infrastructure

Structured opportunities in certain emerging sectors

Corporate Banking

Structured Finance

24

Contents
ICICI Bank today

Retail banking
Corporate banking & structured finance

Merger process
Financial performance

25

Merger process

Obtaining

Challenges

regulatory approvals within a short timeperiod of 6 months

Compliance Compliance

with SLR & CRR requirements

with directed lending norms

Stipulated at 50% on residual net bank credit

Regulatory

Fair valuation of loans Merger accounting

26

Merger process
All

regulatory approvals obtained compliance with SLR & CRR requirements

Compliance status

Full

Raised Rs. 180.00 billion in 5 months

Without distortion of yield curve With minimal asset-liability mismatch

Directed

lending norms

Home loans of less than Rs. 1.0 million qualify for priority sector lending Innovative approach to agri-financing to meet priority sector objectives while mitigating credit risks Fair valuation of loans Merger accounting

Regulatory

27

Merger process
Fair

valuation of loans done by Deloitte Haskins & Sells

Comprehensive review of credit rating methodology Robust approach to evaluation
Examination

Valuation

of loan files and review of collateral Analysis of projections and restructuring schemes (if any) to estimate future cashflows

Discounted value of cashflows on the loan calculated to estimate the fair value Provisioning requirement ascertained by above process extrapolated to the balance portfolio

Equity

& related investment portfolio marked to

market
Regulatory Fair valuation of loans Merger accounting

28

Merger process
Accounting

for the merger under purchase method Fair valuation reflected through additional provisions Best practices

Partly in ICICIs accounts prior to the Appointed Date Balance adjusted against ICICIs reserves transferred to ICICI Bank on the Appointed Date

Leading

to a Gross book Existing Fair value de-risked portfolio

2.19

(Rs. in billion)

Non-performing loans Other loans 476.36 Mark-to-market of investments Total fair valuation adjustment

Total Coverage value provision provision provision 69.18 34.66 9.02 43.68 63.1% 19.53 9.25 37.80 21.72 4.5%

4.5% cover against the total performing portfolio Regulatory Fair valuation of loans Merger accounting

29

Contents
ICICI Bank today

Retail banking
Corporate banking & structured finance

Merger process
Financial performance

30

Profit & loss statement1

(Rs. in billion)

Interest income

Q4FY01 3.69 2.44 1.25 1.00 0.61 0.39 1.22 1.03 0.53 0.50

Q4FY02 6.77 5.33 1.44 1.77 0.99 0.78 1.84 1.37 0.80 0.57

FY01 12.42 8.38 4.04 2.20 1.71 0.49 3.34 2.90 1.29 1.61

FY02 21.52 15.59 5.93 5.75 2.83 2.92 6.23 5.45 2.87 2.58

Inc % 73.3 86.0 46.8 161.4 65.5 495.9 86.5 87.9 122.5 60.2

ICICI Bank
31

Interest expense Net interest income Non-interest income - Core fee income - Trading gains Operating expenses Operating profit Prov. & contingencies Profit after tax

1. Includes operations of ICICI, ICICI PFS and ICICI Caps from the Appointed Date i.e., Mar 30, 2002.

Balance sheet: Assets

(Rs. in billion)

FY01 Cash, balances with banks & SLR - Cash & balances with RBI & banks - SLR investments Advances Debentures & bonds Other investments Fixed assets Other assets Total assets

FY02 Standalone 77.06 286.14 35.94 41.12 70.31 30.70 10.05 3.84 5.40 86.48 199.66 48.32 28.25 4.62 4.35 10.06 381.74

FY02 Merged 357.64 129.71 227.93 470.35 75.41 55.58 42.39 39.73 1,041.10

ICICI Bank

197.36

32

Balance sheet: Liabilities

(Rs. in billion)

FY01 Net worth - Equity capital

FY02 Standalone 13.13 15.45 2.20 10.93 2.20 13.25 325.13 24.97 29.57 270.59 28.90 3.95 12.26 381.74

FY02 Merged 62.49 6.13 56.36 3.50 320.85 24.97 27.36 268.52 589.70 97.51 64.56 1,041.10

ICICI Bank

- Reserves Preference capital Deposits - Savings deposits - Current deposits - Term deposits Borrowings Of which: Sub-debt Other liabilities Total liabilities

163.78 18.81 26.22 118.75 12.00 1.68 8.45 197.36

33

US GAAP: Income statement

(Rs. in billion)

FY01 Interest revenue Interest expense 12.41 8.41 4.00 1.08 1.75 3.10 1.57 0.26 1.31

FY02 20.84 15.12 5.72 1.72 5.21 6.26 2.95 0.91 2.04

Inc. % 67.9 79.8 43.0 59.3 197.7 101.9 87.9 265.4 55.7

ICICI Bank
34

NII Provision for credit losses Non-interest revenue Non-interest expense Income before tax Income tax & others Net income

US GAAP: Net income reconciliation

(Rs. in billion)

FY2001 As per Indian GAAP Profit of ICICI, ICICI Capital & ICICI PFS for two days included under Indian GAAP Deferred taxation Provision for credit losses MTM on trading & AFS portfolio Premium & processing fee amortisation Business combination in respect of Bank of Madura merger Others Total adjustments as per US GAAP As per US GAAP 1.61 0.44 (0.40) (0.41) (0.10) 0.16 (0.30) 1.31

FY2002 2.58 (0.08) 0.21 0.10 (0.05) (0.34) (0.17) (0.21) (0.54) 2.04

35

ICICI Bank

In conclusion

Having complied with all regulatory requirements, the merged entity, with an established brand and strong technology focus, is now well placed to harness the vast retail potential and consolidate its position in corporate banking to emerge as the leading financial solutions provider in India

36

Safe Harbour
Except for the historical information contained herein, statements in this release which contain words or phrases such as will, aim, will likely result, would, believe, may, expect, will continue, anticipate, estimate, intend, plan, contemplate, seek to, future, objective, goal, project, should, will pursue and similar expressions or variations of such expressions may constitute "forward-looking statements". These forward-looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. These risks and uncertainties include, but are not limited to our ability to successfully implement our strategy, future levels of non-performing loans, our growth and expansion, the adequacy of our allowance for credit losses, our provisioning policies, technological changes, investment income, cash flow projections, our exposure to market risks as well as other risks detailed in the reports filed by ICICI Bank Limited with the Securities and Exchange Commission of the United States. ICICI Bank Limited undertakes no obligation to update forwardlooking statements to reflect events or circumstances after the date thereof.

37

Thank You

38

Profit & loss statement

Q4 FY01 21.06 17.99 3.07 1.42 4.49 0.83 3.66 Q4 FY02 19.44 16.40 3.04 0.43 3.47 1.16 2.31 FY01 82.11 69.12 12.99 5.22 18.21 3.37 14.84
(Rs. in billion) FY02 Inc.%

ICICI standalone

Fund based income Less: Interest & related expenses & Lease dep. Net fund based income Fees and commissions Net i/c from operations Operating expenses Profit from operations

84.75 70.74 14.01 4.72 18.73 3.64 15.09

3.2 2.4 7.8 (9.6) 2.8 8.0 1.7

39

Profit & loss statement

(Rs. in billion)

ICICI standalone

Profit from operations Less: Provisions & write-offs Add: Dividend Add: Net capital gains Add: Other income Profit before tax and additional items Less: Additional prov. & inv. write down Less: Provision for tax Profit after tax

Q4 Q4 FY01 FY02 Inc.% FY01 FY02 3.66 2.31 14.84 15.09 1.7 2.76 0.40 3.47 0.45 5.22 2.98 0.58 2.84 0.04 6.08 1.08 3.44 0.62 6.10 1.78 0.3 64.6

2.37 (31.2) 0.18 (69.8) (4.2)

2.79 13.90 13.32 8.13 0.40 5.37

8.13 5.57 (0.34) (0.84) (2.57) (1.94)

5.57 1.05 162.5 6.70 24.7

40