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
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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

Benchmarking (contd.)
Consumer loans / Total loans
58.0% 36.0% 26.0% 8.0% 13.0%
1.0% 9.0%
USA - 51%

Mortgages / GDP

37.0%

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

In dia India

Thailand Taiw an Thailand Taiwan

M alaysia Malaysia

Kor ea 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
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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 8

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
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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

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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
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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 H o m e lo ans Other retail lo ans

Home & others

Bank accounts

Credit cards

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Our growth in retail (contd.)

Int e rn e t ba nk ing c us t o m e r s 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

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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

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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

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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

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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

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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

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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

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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

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Merger process

 Obtaining

Challenges

regulatory approvals within a short timeperiod of 6 months with SLR & CRR requirements with directed lending norms

 Compliance  Compliance


Stipulated at 50% on residual net bank credit

Regulatory

Fair valuation of loans Merger accounting

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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 Regulatory Fair valuation of loans Merger accounting

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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

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Merger process
for the merger under purchase method  Fair valuation reflected through additional provisions
 Accounting

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

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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
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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

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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

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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
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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

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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

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