Project On ICICI Bank

SUMMER TRAINING PROJECT REPORT ON

ANALYSIS OF FINANCIAL STATEMENT OF ICICI BANK SUBMITTED IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR BACHELOR IN BUSINESS ADMINISTRATION (GEN) (Session)

PREPARED BY: VIPUL BBA(GEN) ENROLL NO.

UNDER THE GUIADENCE OF: MR. AMIT GUPTA

MAHARAJA AGRASEN INSTITUTE OF MANAGEMENT STUDIES

AFFILATED TO GURU GOBIND SINGH INDRAPRASTHA UNIVERSITY

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CERTIFICATE This is to certify that VIPUL of MAHARAJA AGRASEN INSTITUTE OF MANAGEMENT STUDIES, ROHINI has successfully completed project report on title “ICICI BANK”. This project has been done as a partial fulfillment for BACHELOR IN BUSINESS ADMINISTRATION (BBA) course. The student has also made his project to my entire satisfaction and as per requirement of the course. The work has not been anywhere else for the award of degree. All source of information have been duly mentioned.

MR. AMIT GUPTA (Project Guide) MAIMS

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ACKNOWLEDGEMENT "Accomplishment of any task necessarily depends upon the willingness and enthusiastic contribution of time and energy of many people." From the starting till the completion of this project, there are many people without whose assistance all my efforts would have been fruitless. I, therefore, acknowledge all who generously helped me by sharing their time, experience and knowledge with me without which this project would have never been accomplished. Words can’t express my sincere thanks to the entire faculty of MAIMS, under the prestigious GGSIPU who had been a constant source of guidance throughout my project period. I extend my profound thanks to DR. N.K.KAKKAR (Director, MAIMS) for his invaluable guidance and support. I must express my gratitude to MR. AMIT GUPTA (my project guide) whose perceptive guidance, constant encouragement, constructive criticism and affection were the light of guidance during my tenure of my work. Finally, I would like to state that the project not only fulfilled an academic requirement, but would also help me in future endeavors in the years to come.

VIPUL

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TABLE OF CONTENT S.NO

TOPIC

PAGE NO

CERTIFICATE ACKNOWLEDGEMENT 1

EXECUTIVE SUMMARY

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INTRODUCTION • Objective Of Study • Company Profile RESEARCH METHODOLOGY • Statement of the problem • Research Design • Sampling Technique • Sample size • Sources Of Data Collection • Data Collection Instrument • Data Analysis Technique • Limitation Of The Study

3

4

DATA ANALYSIS

5

FINDINGS

6

CONCLUSIONS & SUGGESTIONS

7

BIBLIOGRAPHY

8

ANNEXURE

4

EXECUTIVE SUMMARY

5

EXECUTIVE SUMMARY In any organization, the two important financial statements are the Balance sheet & Profit and loss account of the business. Balance sheet is a statement of the financial position of an enterprise at a particular point of time. Profit and loss account shows the net profit or net loss of a company for a specified period of time. When these statements of the last few year of any organization are studied and analyzed, significant conclusions may be arrived regarding the changes in the financial position, the important policies followed and trends in profit and loss etc. Analysis and interpretation of the financial statement has now become an important technique of credit appraisal. The investors, financial experts, management executives and the bankers all analyze these statements. Though the basic technique of appraisal remains the same in all the cases but the approach and the emphasis in analysis vary. A banker interprets the financial statement so as to evaluate the financial soundness and stability, the liquidity position and the profitability or the earning capacity of borrowing concern. Analysis of financial statement is necessary because it help in depicting the financial position on the basis of past and current records. Analysis of financial statement helps in making the future decision and strategies. Therefore, it is very necessary for every organization whether it is a financial or manufacturing etc. to make financial statement and to analyse it.

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INTRODUCTION •Objective Of Study Company Profile •

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Objective Of Study The main objectives of this project are the following:  To study about ICICI BANK and its related aspects like its products & services, history, organizational structure, subsidiary companies etc.  To analyse the financial statement i.e P&L account and Balance sheet of ICICI BANK.  To

learn

about

P&L

Account,

Balance-sheet

and

different type of Assets& Liabilities.  To understanding the meaning and need of Balance Sheet and profit and loss account.  The purpose is to portray the financial position of ICICI BANK with the help of Balance sheet and profit and loss account.  To evaluate the financial soundness ,stability and liquidity of ICICI BANK.

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Company Profile ICICI BANK ICICI Bank is India’s second-largest bank with total assets of 3,997.95 billion (US$ 100 billion) at March 31, 2008 and profit after tax of year ended March 31, 2008.

Rs. 41.58 billion for the

ICICI Bank is the most valuable bank in India in terms

of market capitalization and is ranked second amongst all the companies listed on the Indian stock exchanges. In terms of free float market capitalization*. The Bank has a network of about 1308 branches and 3,950 ATMs in India and presence in 18 countries. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customer through a variety of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management. The Bank currently has subsidiaries in the United Kingdom, Russia and Canada, branches in Singapore, Bahrain, Hong Kong, Sri Lanka and Dubai International Finance Center and representative offices in the United States, United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. UK subsidiary has established a branch in Belgium. ICICI Bank's equity shares are listed in India on Bombay Stock Exchange (BSE) and the National Stock Exchange (NSE) of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE).

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3.1.1HISTORY ICICI Bank was originally promoted in 1994 by ICICI Limited, an Indian financial institution, and was its wholly owned subsidiary. ICICI's shareholding in ICICI Bank was reduced to 46% through a public offering of shares in India in fiscal 1998, an equity offering in the form of ADRs listed on the NYSE in fiscal 2000, ICICI Bank's acquisition of Bank of Madura Limited in an all-stock amalgamation in fiscal 2001, and secondary market sales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian industry. The principal objective was to create a development financial institution for providing medium-term and long-term project financing to Indian businesses. In the 1990s, ICICI transformed its business from a development financial institution offering only project finance to a diversified financial services group offering a wide variety of products and services, both directly and through a number of subsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE. After consideration of various corporate structuring alternatives in the context of the emerging competitive scenario in the Indian banking industry, and the move towards universal banking, the managements of ICICI and ICICI Bank formed the view that the merger of ICICI with ICICI Bank would be the optimal strategic alternative for both entities, and would create the optimal legal structure for the ICICI group's universal banking strategy. The merger would enhance value for ICICI shareholders through the merged entity's access to lowcost deposits, greater opportunities for earning fee-based income and the ability to participate in the payments system and provide transaction-banking services. The merger would enhance value for ICICI Bank shareholders through a large capital base and scale of operations, seamless access to ICICI's strong corporate relationships built up over five decades, entry into new business segments, higher market share in various business segments, particularly fee-based services, and access to the vast talent pool of ICICI and its subsidiaries. In 10

October 2001, the Boards of Directors of ICICI and ICICI Bank approved the merger of ICICI and two of its wholly-owned retail finance subsidiaries, ICICI Personal Financial Services Limited and ICICI Capital Services Limited, with ICICI Bank. The merger was approved by shareholders of ICICI and ICICI Bank in January 2002, by the High Citst of Gujarat at Ahmedabad in March 2002, and by the High Citst of Judicature at Mumbai and the Reserve Bank of India in April 2002. Consequent to the merger, the ICICI group's financing and banking operations, both wholesale and retail, have been integrated in a single entity. ICICI Bank has formulated a Code of Business Conduct and Ethics for its directors and employees.

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3.1.2 BOARD OF DIRECTORS 

MR. N.Vaghul (CHAIRMAN)



MR. Sridar Iyengar



MR. Lakshmi N. Mittal



MR. Narendra Murkumbi



MR. Anupam Puri



Mr. Arun Ramanathan



MR. M. K. Sharma



MR. P.M. Sinha



Prof. Marti G. Subrahmanyam



MR. T. S. Vijayan



MR. V. Prem Wasta



MR. K. V. Kamath (MANAGING DIRECTOR & CEO)



MR. Chanda Kochhar (JOINT MANAGING DIRECTOR)



MR. V. Vaidyanathan, (EXECUTIVE DIRECTOR)



Ms. Madhabi Puri-Buch, Executive Director



MR. Sonjoy Chatterjee (EXECUTIVE DIRECTOR)

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3.1.3 BOARD COMMITTEES

Audit Committee

Board Governance & Remuneration Committee Mr. N. Vaghul Mr. Anupam Puri Mr. M. K. Sharma Mr. P. M. Sinha Prof. Marti G. Subrahmanyam

Mr. Sridar Iyengar Mr. Narendra Murkumbi Mr. M. K. Sharma

Customer Service Committee

Credit Committee

Mr. N. Vaghul Mr. Narendra Murkumbi Mr. M.K. Sharma Mr. P.M. Sinha Mr. K. V. Kamath

Mr. N. Vaghul Mr. Narendra Murkumbi Mr. M .K. Sharma Mr. P. M. Sinha Mr. K. V. Kamath

Fraud Monitoring Committee

Risk Committee

Mr. M. K. Sharma Mr. Narendra Murkumbi Mr. K. V. Kamath Ms. Chanda D. Kochhar Mr. V. Vaidyanathan

Mr. N. Vaghul Mr. Sridar Iyengar Prof. Marti G. Subrahmanyam Mr. V. Prem Watsa Mr. K. V. Kamath

Share Transfer & Shareholders/ Investors Grievance Committee Mr. M. K. Sharma Mr. Narendra Murkumbi Ms. Chanda D. Kochhar Ms. Madhabi Puri-Buch

Asset-Liability Management Committee Ms. Chanda D. Kochhar Ms. Madhabi Puri-Buch Mr. Sonjoy Chatterjee Mr. V. Vaidyanathan

Committee of Directors

-

Mr. K. V. Kamath Ms. Chanda D. Kochhar Ms. Madhabi Puri-Buch Mr. Sonjoy Chatterjee Mr. V. Vaidyanathan

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3.1.4 ICICI Bank’s global network, today, spans 18 countries.

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3.1.5 VISION AND MISSION 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.

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3.1.7 ORGANISATIONAL STRUCTURE OF ICICI BANK ICICI Bank’s organisation structure is designed to be flexible and customerfocused, while seeking to ensure effective control and supervision and consistency in standards across the organisation and align all areas of operations to overall organisational objectives. The organisation structure is divided into six principal groups – Retail Banking, Wholesale Banking, International Banking, Rural (Micro-Banking) and Agriculture Banking, Government Banking and Corporate Center.

RETAIL BANKING The Retail Banking Group is responsible for products and services for retail customers and small enterprises including various credit products, liability products, distribution of third party investment and insurance products and transaction banking services.

WHOLESALE BANKING The Wholesale Banking Group is responsible for products and services for large and medium-sized corporate clients, including credit and treasury products, investment banking, project finance, structured finance and transaction banking services.

 INTERNATIONAL BANKING The International Banking Group is responsible for its international operations, including operations in various overseas markets as well as its products and services for non-resident Indians and its international trade finance and correspondent banking relationships.

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RURAL AND AGRICULTURAL BANKING The Rural, Micro-Banking & Agri-Business Group is responsible for envisioning and implementing rural banking strategy, including agricultural banking and micro-finance.

GOVERNMENT BANKING The Government Banking Group is responsible for

government banking

initiatives.

CORPORATE CENTER The Corporate Center comprises the internal control environment functions (including operations, risk management, compliance, audit and legal); finance (including

financial

reporting,

planning

and

strategy,

asset

liability

management, investor relations and corporate communications); human resitsces management; and facilities management & administration.

 BUSINESS REVIEW During fiscal 2008, the Bank continued to grow and diversify its asset base and revenue streams by leveraging the growth platforms created over the past few years. We maintained our leadership position in retail credit, achieved robust growth in our fee income from both corporate and retail businesses, strengthened our deposit franchise and significantly scaled up our corporate and international banking operations.

RETAIL BANKING We are the largest provider of retail credit in India. Our total retail portfolio was Rs. 1,316.63 billion at March 31,2008, constituting 58% of our total loans at that date. 17

During fiscal 2008, we continued our focus on strengthening our retail deposit franchise to create a stable funding base. Our current and savings account (CASA) deposits as a percentage of total deposits increased from 22% at March 31, 2007 to 26% at March 31, 2008, with savings account deposits increasing by 36% during fiscal 2008. During the year, we have expanded our branch network substantially. At March 31, 2008, we had 1,262 branches & extension counters compared to 755 branches & extension counters at March 31, 2007, including the addition of about 200 branches through the merger of Sangli Bank. Our branch network has further increased to 1,367 as of May 31, 2008. We continued to expand our electronic channels, namely internet banking, mobile banking, call centres, point of sale terminals and ATMs, and migrate customer transaction volumes to these channels. We increased our ATM network to 3,881 ATMs at March 31, 2008 from 3,271 ATMs at March 31, 2007.

 SMALL AND MEDIUM ENTERPRISES During fiscal 2008, our small enterprises customer base increased by 26% to about 1.1 million accounts. We have introduced our service offerings in over 400 new branches, increasing our coverage to over 1,000 branches. During the year, we have focused on product specialisation including investment banking for SMEs. We have continued to focus on shaping the small and medium enterprises sphere in India through initiatives such as the “Emerging India Awards”, the SME CEO Knowledge Series - a platform to mentor and assist SME entrepreneurs, and the “SME Dialogue” - a weekly feature in a leading financial newspaper sharing SME best practices and success stories. During the year, we have launched several new products and services like the SME toolkit – an online business and advisory resource for SMEs. .

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CORPORATE BANKING It’s corporate banking strategy is based on providing comprehensive and customized financial solutions to its corporate customers. It offer a complete range of corporate banking products including rupee and foreign currency debt, working capital credit, structured financing, syndication and transaction banking products and services. Fiscal 2008 saw continued demand for credit from the corporate sector, with growth and additional investment demand across all sectors. We were able to leverage our international presence and deep corporate relationships to work on overseas acquisitions made by Indian companies and infrastructure projects in India. During fiscal 2008 we were involved in 75% of outbound mergers and acquisitions deals from India. We are now a preferred partner for Indian companies for syndication of external commercial borrowings and other fund raising in international markets and have been ranked number one in offshore loan syndications of Indian corporates in calendar year 2007. .

RURAL BANKING It’s rural strategy is based on enhancing value at every level of the supply chain in all important farm and non-farm sectors. Towards this end, it offer a range of financial products and services that cater to the rural masses in all the important sectors like infrastructure, horticulture, food processing, dairy, poultry, seeds, fertiliser and agrochemical industries. Customised financial solutions are offered to individual customers, agri small & medium enterprises, agri corporates and members of their supply chains. On the rural retail side, the Bank offers crop loans, farm equipment financing, commodity-based loans, working capital loans for agri-enterprises, microfinance loans, jewel loans as well as savings, investment and insurance products. In addition bank is introducing products like rural housing finance to cater to the needs of rural customers.

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INTERNATIONAL BANKING ICICI Bank has established a strong franchise among non-resident Indians (NRI). It has established strong customer relationships by offering a comprehensive product suite, technology-enabled access for overseas customers, a wide distribution network in India and alliances with local banks in various markets. It has over 5,00,000 NRI customers. It has undertaken significant brand-building initiatives in international markets and have emerged as a well-recognised financial services brand for NRIs. It’s market share in inward remittances into India has increased to over 25%. It has consolidated it’s global remittance initiative, targeting non-Indian communities, by leveraging it’s core capabilities of technology-based service delivery. A large number of remittance products were introduced to complement the existing suite of products. The business focus has been on rolling out successful products across multiple geographies and getting into high volume correspondent arrangements.

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3.1.5 PRODUCTS AND SERVICES BANKING ACCOUNTS ICICI Bank offers a wide range of banking accounts such as Current, Saving, Life Plus Senior, Recurring Deposit, Young Stars, Salary Account etc. tailormade for every customer segments, from children to senior citizens. Convenience and ease to access are the benefits of ICICI Bank accounts.

YOUNG STARS ACCOUNT A special portal for children to learn banking basics, manage personal finances and have a lot of fun.

 BANK@CAMPUS This student banking services gives students access to their account details at the click of a mouse. Plus, the student gets a cheque book, debit card and annual statements.

 SAVINGS ACCOUNTS Convenience is the name of the game with ICICI bank’s savings account. whether it is an ATM/debit card, easy withdrawal, easy loan options or internet banking, ICICI bank’s saving account always keep you in touch of money.

 FIXED DEPOSITS ICICI Bank offers a range of deposit solutions to meet varying needs at every stage of life. It offers a range of tenures and other features to suit all requirements.

INSURANCE The ICICI group offers a range of insurance products to cover varying needs ranging from life, pensions and health, to home, motor and travel insurance. The 21

products are made accessible to customers through a wide network of advisors,

banking

partners, Corporate agents and brokers with the added

convenience of being able to buy online.

 LIFE INSURANCE The ICICI group provides the many life insurance product through ICICI Prudential Life Insurance Company.

 GENERAL INSURANCE The ICICI group provides the many general insurance products like motor, travel and home insurance through ICICI

Lombard General Insurance

Company.

LOANS ICICI bank offers a range of deposits solutions to meet varying needs at every stage of life. It offers a range of tenures and other features to suit all requirements.

 HOME LOAN The No. 1 Home Loans Provider in the country, ICICI Bank Home Loans offers some unbeatable benefits to its customers - Doorstep Service, Simplified Documentation and Guidance throughout the Process. It's really easy !

 PERSONAL LOAN ICICI Bank Personal Loans are easy to get and absolutely hassle free. With minimum documentation you can now secure a loan for an amount upto Rs. 15 lakhs.

 VEHICLE LOANS The No. 1 financier for car loans in the country. Network of more than 2500 channel partners in over 1000 locations. Tie-ups with all leading automobile manufacturers to ensure the best deals. Flexible schemes & 22

quick processing are the main advantages are here. Avail attractive schemes at competitive interest rates from the No 1 Financier for Two Wheeler Loans in the country . Finance facility upto 90% of the On Road Cost of the vehicle, repayable in convenient repayment options and comfortable tenors from 6 months to 36 months

CARDS ICICI Bank offers a variety of cards to suit different transactional needs. Its range includes Credit Cards, Debit Cards and Prepaid cards. These cards offer you convenience for financial transactions like cash withdrawal, shopping and travel. These cards are widely accepted both in India and abroad.

 CREDIT CARD ICICI Bank Credit Cards give you the facility of cash, convenience and a range of benefits, anywhere in the world. These benefits range from life time free cards, Insurance benefits, global emergency assistance service, discounts, utility payments, travel discounts and much more.

 DEBIT CARD The ICICI Bank Debit Card is a revolutionary form of cash that allows customers to access their bank account around the clock, around the world. The ICICI Bank Debit Card can be used for shopping at more than 3.5 Lakh merchants in India and 24 million merchants worldwide.

 TRAVEL CARD ICICI Bank Travel Card. The Hassle Free way to Travel the world. Traveling with US Dollar, Euro, Pound Sterling or Swiss Francs; Looking for security and convenience; take ICICI Bank Travel Card. Issued in duplicate. Offers the Pin based security. Has the convenience of usage of Credit or Debit card.

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MOBILE BANKING Bank on the move with ICICI Bank Mobile Banking. With ICICI Bank, Banking is no longer what it used to be. ICICI Bank offers Mobile Banking facility to all its Bank, Credit Card, Demat and Loan customers. ICICI Bank Mobile Banking can be divided into two broad categories of facilities: 

Alert facility : ICICI Bank Mobile Banking Alerts facility keeps you informed about the significant transactions in yits Accounts. It keeps you updated wherever you go.



Request facility : ICICI Bank Mobile Banking Requests facility enables you to query for yits account balance.

INVESTMENT PRODUCTS: Along with Deposit products and Loan offerings, ICICI Bank assists you to manage yits finances by providing various investment options ranging from ICICI Bank Tax Saving Bonds to Equity Investments through Initial Public Offers and Investment in Pure Gold. ICICI Bank facilitates following investment products: •

ICICI Bank Tax Saving Bonds

•

Government of India Bonds

•

Investment in Mutual Funds

•

Initial Public Offers by Corporates

•

Investment in "Pure Gold"

•

Foreign Exchange Services

•

Senior Citizens Savings Scheme, 2004

TRADE-SERVICES: ICICI Bank offers online remittances as well as online processing of letters of credit and bank guarantees.

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ASSET-MANAGEMENT:

Prudential

ICICI

Asset

Management

Company offers a wide range of retail mutual fund products tailored to suit varied risk and maturity profiles.

CASH MANAGEMENT: ICICI Bank offers a complete range of highly customized solutions for managing both the collections and payments requirements of clients by leveraging technology. Daily customized transactions reports and real time web-enabled downloads, provide on-tap information facilitating effective working capital management.

CORPORATE BANKING: ICICI Bank offers comprehensive and customized financial solutions for its corporate clients, including rupee and foreign currency debts, working capital credit, structured financing syndication and transaction banking products and services.

INTERNET BANKING: Internet banking is available to all ICICI bank savings and deposit account holders, credit card, demat and loan customers. Internet banking service offers customers a world of convenience with services such as balance enquiry, transaction history, account statement, bill payments, fund transfers and accounts related service requests.

ATMs: With more than 2500 ATMs across the country, ICICI Bank has one of the largest ATM networks in India

PHONE BANKING: Phone banking offers 24*7 service across liability, asset and investment products to both retail and corporate customers.

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NRI-BANKING: A gamut of services to take care of all NRI banking needs including deposits, money transfers and private banking.

MONEY2INDIA: A complete range of online and offline money transfer solutions to send money to India.

PROPERTY: For millions of home buyers across the country, ICICI Bank offers not just great deals on home loans but also a wealth of expert advice. ICICI Bank offers home search service which can help a customer identify the property of his choice based on his budget and other requirements.

DEMAT ACCOUNTS: ICICI Bank’s demat services after unique features like e-constructions, consolidation, digitally signed statements, mobile requests and corporate benefit tracking.

RURAL-BANKING: Bank offers technology-based solutions, financial innovations and multiple delivery channels to meet the financial needs of rural areas.

MICROFINANCE: ICICI Bank assists over 2.5 million low income clients to build livelihoods by partnering With over 100 microfinance institutions.

BRANCHES: ICICI Bank has a network of over 630 branches ( of which 51 are extension counters) across the country. The network puts a wide range of banking products and financial services with in easy reach of retail and corporate customers.

3.1.6 RISK ASPECTS OF ICICI BANK 26

 RISK MANAGEMENT Risk is an integral part of the banking business and bank aim at delivering superior shareholder value by achieving an appropriate trade-off between risk and returns. Bank is exposed to various risks, including credit risk, market risk and operational risk. Bank’s risk management strategy is based on a clear understanding of various risks, disciplined risk assessment and measurement procedures and continuous monitoring. The policies and procedures established for this purpose are continuously benchmarked with international best practices. Bank has two dedicated groups, the RISK MANAGEMENT GROUP (RMG) and COMPLIANCE & AUDIT GROUP (CAG) which is responsible for assessment, management and mitigation of risk in ICICI Bank. These groups from part of the corporate center are completely independent of all business operations and are accountable to the Risk and Audit committees of the Board of directors. RMG is further organized into the Credit Risk Management group, Market Risk Management group, Retail Risk Management group and Operational Risk Management group. CAG is further organised into the Credit Policies, RBI Inspection & Anti-Money Laundering Group and the Internal Audit Group.

CREDIT RISK Credit risk is the risk that a borrower is unable to meet its financial obligations to the lender. Bank measure, monitor and manage credit risk for each borrower and also at the portfolio level. Bank has standardized credit-approval processes, which include a well-established procedure for comprehensive credit appraisal and rating. ICICI Bank has well developed internal credit rating methodologies for rating obligors. The rating factors in quantitative, qualitative issues and credit enhancement features specific to the transaction. The rating serves as a key input in the approval as well as post-approval credit processes. Industry knowledge is constantly updated through field visits and interactions with clients, regulatory bodies and industry experts. In retail credit operations, the Board or a Board Committee approves all products, policies and authorizations. 27

Credit approval authority lies only with the credit officers who are distinct from the sales team. Credit scoring models are used in the case of certain products like credit cards. External agencies such as field investigation agencies and credit processing agencies are used to facilitate a comprehensive due diligence process including visits to offices and homes in the case of loans to individual borrowers.

 MARKET RISK Market risk is the risk of loss resulting from changes in interest rates, foreign currency exchange rates, equity prices and commodity prices. The objective of market risk management is to minimize the impact of losses on earnings and equity capital due to market risk. Market risk policies include the Investment Policy and the Asset-Liability Management (ALM) Policy. The policies are approved by

the Board of Directors. The Asset Liability Management

Committee (ALCO) of the Board of Directors stipulate liquidity and interest rate risk limits, monitors adherence to limits, articulates the organisation’s interest rate view and determines the strategy in light of the current and expected environment. These policies and processes are articulated in the ALPM policy. The investment policy addresses issues related to investment in various trading products. RMG exercises independent control over the process of market risk management and recommends changes in process and methodologies for measuring market risk Interest rate risk is measured through the use of re-pricing gap analysis and duration analysis. Liquidity risk is measured through gap analysis. Bank ensure adequate liquidity at all time through systematic funds planning and maintenance of liquid investment as well as focusing on more stable funding sitsces such as retail deposits. ICICI Bank limit exposure to exchange rate risk by stipulating position limits. The treasury Middle Office Group monitors the asset-liability position under the supervision of the ALCO. The Treasury Middle Office Group is also responsible for processing treasury transactions, tracking the daily funds position and 28

complying with all treasury related management and regulatory reporting requirements.

 OPREATIONAL RISK Operational risk is the risk of loss that can result from a variety of factors, including failure to obtain proper internal authorizations, improperly documented transactions, failure of operational and information security procedures, computer systems, software or equipment, fraud, inadequate training and employee errors. Bank’s approach to operational risk management is designed to mitigate operational risk by maintaining a comprehensive system of internal controls, establishing systems and procedures to monitor transactions, maintaining key back-up procedures and undertaking regular contingency planning. Effective operational risk management system would ensure that bank has sufficient information to make appropriate decisions about additional controls, adjustments to controls, or other risk responses. Operational risk management policy aims at minimizing losses and customer dissatisfaction due to failure in processes, focusing on flaws in products and their design that can expose the bank to losses due to fraud, analyzing the impact of failures in systems, developing mitigants to minimize the impact and developing plans to meet external shocks that can adversely impact continuity in the bank’s operations.

3.1.7 SUBSIDIARY COMPANIES 29

DOMESTIC SUBSIDIARIES  ICICI Home Finance Company Limited  ICICI Investment Management Company Limited

 ICICI Lombard General Insurance Company Limited  ICICI Prudential Life Insurance Company Limited  ICICI Securities Limited  ICICI Trusteeship Services Limited  ICICI Venture Funds Management Company Limited ICICI Securities Primary Dealership Limited

 ICICI Prudential Asset Management Company Limited  ICICI Prudential Trust Limited

INTERNATIONAL SUSIDIARIES  ICICI Bank Canada  ICICI Bank Eurasia Limited Liability Company  ICICI International Limited  ICICI Securities Holding Inc  ICICI Securities Inc  ICICI Bank Uk Limited

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3.1.8 KEY GROUP COMPANIES

ICICI PRUDENTIAL INSURANCE COMPANY ICICI Life continued to maintain its market leadership among private sector life insurance companies with a market share of 12.71% on the basis of weighted received premium. 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 Life had a negative impact of Rs. 10.31 billion on the Bank’s consolidated profit after tax in FY2008 on account of the above reasons, the company’s unaudited New Business Achieved Profit (NBAP) for FY2008 was Rs. 12.54 billion as compared to Rs. 8.81 billion in fiscal 2007.

ICICI LOMBARD GENERAL INSURANCE COMPANY ICICI Lombard General Insurance Company (ICICI General) enhanced its leadership position with a market share of about 29.8% among private sector general insurance companies and an overall market share of about 11.9% during fiscal 2008. ICICI General’s gross written premium grew by 11.4% from Rs. 31

30.03 billion in fiscal 2007 to Rs. 33.45 billion in fiscal 2008. ICICI General is required to expense upfront, on origination of a policy, all sitscing expenses related to the policy. While ICICI General’s profit after tax for Rs. 1.03 billion in fiscal 2008,a growth of 50.5% over fiscal 2007.The combined ratio is the sum of net claims and expenses as a percentage of premiums and indicates the surplus generated on an annualised basis from the business written during a period (excluding investment income).

ICICI PRUDENTIAL AMC & TRUST ICICI Prudential Asset Management Company (ICICI AMC) was the second largest asset management company in India with average assets under management of Rs. 543.55 billion for March 2008. ICICI AMC achieved a profit after tax of Rs. 0.82 billion in fiscal 2008, a growth of 69.7% over fiscal 2007.

ICICI SECURITIES LIMITED The securities and primary dealership business of the ICICI group have been reorganised. ICICI Securities Limited has been renamed as ICICI Securities Primary Dealership Limited. ICICI Brokerage Services Limited has been renamed as ICICI Securities Limited and has become a direct subsidiary of ICICI Bank. ICICI Securities achieved a profit after tax of Rs. 1.50 billion and ICICI Securities Primary Dealership achieved a profit after tax of Rs. 1.40 billion, in fiscal 2008.

ICICI VENTURE FUNDS MANAGEMENT COMPANY LIMITED ICICI Venture Funds Management Company Limited (ICICI Venture) strengthened its leadership position in privateequity in India, with funds under management of about Rs. 95.50 billion at year-end fiscal 2008. ICICI Venture achieved a profit after tax of Rs. 0.90 billion in fiscal 2008 compared to Rs. 0.70 billion in fiscal 2007.

32

3.1.9 KEY FINANCIAL INDICATORS

33

3.1.10 Market Price Information

34

3.1.11 PUBLIC RECOGNITION

On May 5, 2008, Mr. K. V. Kamath, MD&CEO was awarded the prestigious Padma Bhushan by the President of India 35

The Bank received several awards during fiscal 2008, including the following: •

“Best Bank in Asia” by Euromoney

•

“Best Bank in India” by Euromoney

•

“Fabulous 50 companies in Asia” by Forbes Asia

•

“Best Domestic Bank in India” by Asset Triple A

•

“Best Bank of the Year (India)” by The Banker

•

“Best Private Sector Bank” by Outlook Money NDTV Profit Awards 2007

•

“Asia’s Best Financial Borrower 2007“ by Euromoney

•

“Excellence in Remittance Business“ by Asian Banker

•

“Most Preferred Brand” for home loans, auto loans, credit cards and financial advisory services by CNBC Awaaz

•

“Innovative Technology Award” by CIO

•

“Best Regional Private Bank” by The Banker

36

•

“Excellence in Financial Reporting” by Institute of Chartered Accountants of India (ICAI)

RESEARCH

37

METHODOLOGY

LIMITATIONS

38

DATA ANALYSIS 39

4.1 STUDY OF PROFIT& LOSS A/C 4.1.1 MEANING: It is a financial statement, which shows net loss of a company for a specified period. The accounting year means calendar year of 12 months or less or more than 12 months.

4.1.2 CONTENTS: This presents the revenues and expenses of a company and shows the excess of revenues over expenses for profit and vice versa for a loss.

4.1.3 FORMAT: The Companies act does not provide any specific format for this account. However it is required to be prepared on the basis of the instructions given in part ii of schedule (vi) of the companies act.

4.1.4 MAIN ITEMS OF PROFIT AND LOSS ACCOUNT  Turnover or sales: The aggregate amount of sales and connected items

with the sales such as commission paid to sole-selling agents and other selling agents and brokerage and discounts on sales other than usual trade discount.  Depreciation: The amount of depreciation of fixed assets and the arrears

of depreciation as per section 205(2) shall be disclosed by way of footnote.

40

 Interest on loans and debentures: Interest on loans and debentures has

to be stated separately. It will include the amount of interest paid as well as outstanding.  Miscellaneous expenses: In this head items such as rates and taxes,

insurance premium etc., must be stated separately.  Preliminary expenses: Such expenses include the costs of formation of a

company and since their amount is usually large, it is not desirable to write off them in one year.  Provision for taxation: The profit and loss account of a company must

be debited with the estimated liabilities for tax on the current profits at current rates of taxation.  Unclaimed dividends: It is shown on the liabilities side of the balance

sheet under the heading ‘current liabilities ‘.  Interim dividends: It is an item of appropriation. It is transferred to the

debit side of the Profit and loss appropriation account.  Final dividend as an item of the trial balance: This is shown in the

debit side of the appropriation section of the profit and loss account.  Proposed dividend or final dividend proposed: Since it is an

adjustment item, it has to be shown at two places- In the debit side of the profit and loss appropriation account and on the liabilities side of the balance sheet under the head ‘current liabilities and provisions’.  Political donations: It must be shown as a separate item in the profit and

loss account.  Dividend on interest income: This item is transferred to the credit side

of the profit and loss account.  Payment to auditors: It must be stated separately. This will include

consultancy fee, auditing fees management services etc.  Managerial remuneration: This includes the payments made to

managerial remuneration director’s fee, pension, other allowances and commission. 41

4.2 STUDY OF BALANCE SHEET 4.2.1 MEANING: The balance sheet is a financial snapshot of a company's condition at a single point in time. A balance sheet contains a listing of the company's asset, liability and Capital accounts. When someone, whether a creditor or investor, asks you how your company is doing, you'll want to have the answer ready and documented. The way to show off the success of your company is a balance sheet. A balance sheet is a documented report of your company's assets and obligations, as well as the residual ownership claims against your equity at any given point in time. It is a cumulative record that reflects the result of all recorded accounting transactions since your enterprise was formed. You need a balance sheet to specifically know what your company's net worth is on any given date. With a properly prepared balance sheet, you can look at a balance sheet at the end of each accounting period and know if your business has more or less value, if your debts are higher or lower, and if your working capital is higher or lower. By analyzing your balance sheet, investors, creditors and others can assess your ability to meet short-term obligations and solvency, as well as your ability to pay all current and long-term debts as they come due. The balance sheet also shows the composition of assets and liabilities, the relative proportions of debt and equity financing and the amount of earnings that you have had to retain. Collectively, external parties to help assess your company’s financial status, which is required by both lending 42

institutions and investors before they will allot any money toward your business, will use this information.

4.2.2 LEARN THE DIFFERENT ASSETS Current assets: Current assets include cash and other assets that in the normal course of events are converted into cash within the operating cycle. For example, a manufacturing enterprise will use cash to acquire inventories of materials. These inventories of materials are converted into finished products and then sold to customers. Cash is collected from the customers. This circle from cash back to cash is called an operating cycle. In a merchandising business one part of the cycle is eliminated. Materials are not purchased for conversion into finished products. Instead, the finished products are purchased and are sold directly to the customers. Several operating cycles may be completed in a year, or it may take more than a year to complete one operating cycle. The time required to complete an operating cycle depends upon the nature of the business. It is conceivable that almost all of the assets that are used to conduct your business, such as buildings, machinery, and equipment, can be converted into cash within the time required to complete an operating cycle. However, your current assets are only those that will be converted into cash within the normal course of your business. The other assets are only held because they provide useful services and are excluded from the current asset classification. If you happen to hold these assets in the regular course of business, you can include them in the inventory under the classification of current assets. Current assets are usually listed in the order of their liquidity and frequently consist of cash, temporary investments, accounts receivable, inventories and prepaid expenses.  Cash: Cash is simply the money on hand and/or on deposit that is

available for general business purposes. It is always listed first on a balance sheet. Cash held for some designated purpose, such as the cash held in a fund for eventual retirement of a bond issue, is excluded from current assets. 43

 Marketable Securities: These investments are temporary and are made

from excess funds that you do not immediately need to conduct operations. Until you need these funds, they are invested to earn a return.  Accounts Receivable: Simply stated, accounts receivables are the

amounts owed to you and are evidenced on your balance sheet by promissory notes. Accounts receivable are the amounts billed to your customers and owed to you on the balance sheet's date. You should label all other accounts receivable appropriately and show them apart from the accounts receivable arising in the course of trade. If these other amounts are currently collectible, they may be classified as current assets.  Inventories: Your inventories are your goods that are available for sale,

products that you have in a partial stage of completion, and the materials that you will use to create your products. The costs of purchasing merchandise and materials and the costs of manufacturing your various product lines are accumulated in the accounting records and are identified with either the cost of the goods sold during the fiscal period or as the cost of the inventories remaining.  Prepaid expenses: These expenses are payments made for services that

will be received in the near future. Strictly speaking, your prepaid expenses will not be converted to current assets in order to avoid penalizing companies that choose to pay current operating costs in advance rather than to hold cash. Often your insurance premiums or rentals are paid in advance.

Investments: Investments are cash funds or securities that you hold for a designated purpose for an indefinite period of time. Investments include stocks or the bonds you may hold for another company, real estate or mortgages that you are holding for income-producing purposes. Your investments also include money that you may be holding for a pension fund.

Plant Assets: Often classified as fixed assets, or as plant and equipment, your plant assets include land, buildings, machinery, and equipment that are to be 44

used in business operations over a relatively long period of time. It is not expected that you will sell these assets and convert them into cash. Plant assets simply produce income indirectly through their use in operations.

Intangible Assets: Your other fixed assets that lack physical substance are referred to as intangible assets and consist of valuable rights, privileges or advantages. Although your intangibles lack physical substance, they still hold value for your company. Sometimes the rights, privileges and advantages of your business are worth more than all other assets combined.

Other Assets: During the course of preparing your balance sheet you will notice other assets that cannot be classified as current assets, investments, plant assets, or intangible assets. These assets are listed on your balance sheet as other assets. Frequently, your other assets consist of advances made to company officers, the cash surrender value of life insurance on officers, the cost of buildings in the process of construction, and the miscellaneous funds held for special purposes.

4.2.3 LEARN THE DIFFERENT LIABILITIES Current Liabilities: On the equity side of the balance sheet, as on the asset side, you need to make a distinction between current and long-term items. Your current liabilities are obligations that you will discharge within the normal operating cycle of your business. In most circumstances your current liabilities will be paid within the next year by using the assets you classified as current. The amount you owe under current liabilities often arises as a result of acquiring current assets such as inventory or services that will be used in current operations. You show the amounts owed to trade creditors that arise from the purchase of materials or merchandise as accounts payable. If you are obligated under promissory notes that support bank loans or other amounts owed, your liability is shown as notes payable. Other current liabilities may include the estimated amount payable for income taxes and the various amounts owed for

45

wages and salaries of employees, utility bills, payroll taxes, local property taxes and other services. Long-Term Liabilities: Your debts that are not due until more than a year from the balance sheet date are generally classified as long-term liabilities. Notes, bonds and mortgages are often listed under this heading. If a portion of your long-term debt is due within the next year, it should be removed from the longterm debt classification and shown under current liabilities. Deferred Revenues: Your customers may make advance payments for merchandise or services. The obligation to the customer will, as a general rule, be settled by delivery of the products or services and not by cash payment. Advance collections received from customers are classified as deferred revenues, pending delivery of the products or services. Owner's Equity: Your owner's equity must be subdivided on your balance sheet: One portion represents the amount invested directly by you, plus any portion of retained earnings converted into paid-in capital. The other portion represents your net earnings that are retained. This rigid distinction is necessary because of the nature of any corporation. Ordinarily, stockholders, or owners, are not personally liable for the debts contracted by a company. A stockholder may lose his investment, but creditors usually cannot look to his personal assets for satisfaction of their claims. Under normal circumstances, the stockholders may withdraw as cash dividends an amount measured by the corporate earnings. The distinction in this rule gives the creditors some assurance that a certain portion of the assets equivalent to the owner's investment cannot be arbitrarily withdrawn. Of course, this portion could be depleted from your balance sheet because of operating losses. The owner's equity in an unincorporated business is shown more simply. The interest of each owner is given in total, usually with no distinction being made between the portion invested and the accumulated net earnings. The creditors are not concerned about the amount invested. If necessary, creditors can attach the personal assets of the owners.

46

4.2.4 BALANCE-SHEET STRUCTURE Basis of balance-sheet: Assets = Liability + Equity The following Balance sheet structure is just an example. It does not show all possible kind of assets, equity and liabilities, but it shows the most usual ones. It could be a consolidated balance sheet. Monetary values are not shown and summary (total) rows are missing as well.

Assets Current Assets Cash and cash equivalents Inventories Account receivable Investment held for trading Other current assets

Non-Current Assets Property, plant and equipment Goodwill Other intangible fixed assets Investment in associates Deferred tax assets Miscellaneous Expenditure

Equity And Liabilities Capital & Reserve Share capital reserve Revaluation reserve Translation reserve Retained earnings 47

Minority interest

Non-Current Liabilities Bank loan Issued debt securities Deferred tax liability

Current Liabilities Accounts payable Current income tax liability Short-term part of bank loans Short-term provisions

4.2.5 EQUITY VALUATION:The real value to a purchaser of the business or a shareholder may be different from the net assets shown by the balance sheet. This is because factors that affect the value of a business may not be recorded yet. For example, a purchaser will be interested in the future earnings of the business, whether assets such as property have been revalued recently, and whether there are potential liabilities in the future such as lawsuits. The value of the assets in the balance has also been based on the assumption that the business is a going concern, otherwise the break-up value of the assets may be far less than the value in the balance sheet.

4.2.6 PREPAIRING A BALANCE-SHEET  Title and Heading: In practice, the most widely used title is Balance

Sheet; however Statement of Financial Position is also acceptable. Naturally, when the presentation includes more than one time period the title "Balance Sheets" should be used.  Heading: In addition to the statement title, the heading of your balance

sheet should include the legal name of your company and the date or dates that your statement is presented. For example, a comparative presentation might be headed: XYZ CORPORATION BALANCE SHEETS December 31, 2008 48

 Format: There are two basic ways that balance sheets can be arranged. In

Account Form, your assets are listed on the left-hand side and totaled to equal the sum of liabilities and stockholders' equity on the right-hand side. Another format is Report Form, a running format in which your assets are listed at the top of the page and followed by liabilities and stockholders' equity. Sometimes total liabilities are deducted from total assets to equal stockholders' equity.  Captions: Captions are headings within your statement that designate

major groups of accounts to be totaled or subtotaled. Your balance sheet should include three primary captions: Assets, Liabilities and Stockholders' Equity. In the report form of presentation, the placement of your primary captions would be as follows: 2006 ASSETS, LIABILITIES AND STOCKHOLDER’S EQUITY.  Order of Presentation of Captions: First, start with items held primarily

for conversion into cash and rank them in the order of their expected conversion. Then, follow with items held primarily for use in operations but that could be converted into cash, and rank them in the order of liquidity. Finally, finish with items whose costs you will defer to future periods or that you cannot convert into cash.

49

4.3 STUDY OF CASH FLOW STATEMENT 4.3.1 MEANING: Cash flow statement or statement of cash flows is a financial statement that shows a company's incoming and outgoing money (sources and uses of cash) during a time period (often monthly or quarterly). The statement shows how changes in balance sheet and income accounts affected cash and cash equivalents, and breaks the analysis down according to operating, investing, and financing activities. As an analytical tool the statement of cash flows is useful in determining the short-term viability of a company, particularly its ability to pay bills.

4.3.2 PURPOSE: The cash flow statement reflects a firms liquidity or solvency. The main purpose to make cash flow statement are as follows: 1. provide information on a firm's liquidity and solvency and its ability to

change cash flows in future circumstances 2. provide additional information for evaluating changes in assets, liabilities and equity 3. improve the comparability of different firms' operating performance by

eliminating the effects of different accounting methods 4. indicate the amount, timing and probability of future cash flows

50

4.3.3 ACTIVITIES INVOLVED IN CASH FLOW: The cash flow statement is partitioned into cash flow resulting from operating activities, cash flow resulting from investing activities, and cash flow resulting from financing activities. Operating activities: Operating activities include the production, sales and delivery of the company's product as well as collecting payment from its customers. This could include purchasing raw materials, building inventory, advertising. Investing activities: Investing activities focus on the purchase of the long-term assets a company needs in order to make and sell its products, and the selling of any long-term assets. Financing activities: Financing activities include the inflow of cash from investors such as banks and shareholders, as well as the outflow of cash to shareholders as dividends as the company generates income. Other activities which impact the long-term liabilities and equity of the company are also listed in the financing activities section of the cash flow statement. Analysis of cash flow statement is necessary for every organisation to depict its cash inflow and outflow.

4.4 FINANCIAL STATEMENT ANALYSIS 4.4.1 MEANING: Financial statement analysis is the process of examining relationships among financial statement elements and making comparisons with relevant information. It is a valuable tool used by investors and creditors, financial analysts, and others in their decision-making processes related to stocks, bonds, and other financial instruments. With a great understanding of the balance sheet & p&l account and how it is constructed, we can look at some techniques to analyze the information contained within the balance sheet & p&l account. 51

4.4.2 PURPOSE: The main purpose of analyzing the financial statement are the following: To assess past performance and current financial position.  To make predictions about the future performance of a company.

4.4.3 TOOLS FOR ANALYSING 1.PERCENTAGE CALCULATION There are two popular methods by which we can analyze the financial statement by calculating percentage as taking a common base.  Horizontal Analysis When an analyst compares financial information for two or more years for a single company, the process is referred to as horizontal analysis, since the analyst is reading across the page to compare any single line item, such as sales revenues. In addition to comparing dollar amounts, the analyst computes percentage changes from year to year for all financial statement balances, such as cash and inventory. Alternatively, in comparing financial statements for a number of years, the analyst may prefer to use a variation of horizontal analysis called trend analysis. Trend analysis involves calculating each year's financial statement balances as percentages of the first year, also known as the base year. When expressed as percentages, the base year figures are always 100 percent, and percentage changes from the base year can be determined. If we want to calculate % change in sales then we apply the following formula: Percentage=change in sales /Base Year Sales*100 52

 Vertical Analysis When using vertical analysis, the analyst calculates each item on a single financial statement as a percentage of a total. The term vertical analysis applies because each year's figures are listed vertically on a financial statement. The total used by the analyst on the income statement is net sales revenue, while on the balance sheet it is total assets. This approach to financial statement analysis, also known as component percentages, produces common-size financial statements. Common-size balance sheets and income statements can be more easily compared, whether across the years for a single company or across different companies. If we want to calculate % change of current assets then we apply the following formula: Percentage: current assets/total assets*100

2.RATIO ANALYSIS Financial ratio analysis uses formulas to gain insight into the company and its operations. For the balance sheet, using financial ratios (like the debt-to-equity ratio) can show you a better idea of the company’s financial condition along with its operational efficiency. It is important to note that some ratios will need information from more than one financial statement, such as from the balance sheet and the income statement. Ratio analysis facilitates inter-firm and intra-firm comparison. Ratios are often classified using the following terms:  LIQUIDITY RATIO Liquidity ratios are measures of the short-term ability of the company to pay its debts when they come due and to meet unexpected needs for cash. • Current Ratio: The current ratio is a rough indication of a firm ability to service its current obligations. Generally, the higher the current ratio, the 53

greater the cushion between current obligations and a firm ability to pay them. The stronger ratio reflects a numerical superiority of current assets over current liabilities Current ratio is calculated as follows: Current ratio= Current Assets/Current Liabilities • Quick Ratio: It is also known as the “acid test” ratio, this is a refinement of the current ratio and is a more conservative measure of liquidity. The quick ratio expresses the degree to which a company’s current liabilities are recovered by the most liquid current assets. quick ratio is calculated as follows: Quick ratio= (cash + marketable securities + Receivables)/current liabilities  SOLVENCY RATIO Solvency ratios indicate the ability of the company to meet its long-term obligations on a continuing basis and thus to survive over a long period of time. •

Debt/Worth Ratio: This ratio expresses the relationship between capital contributed by creditors and that contributed by owners. It expresses the degree of protection provided by the owners for the creditors. The higher the ratio, the greater the risk being assumed by creditors. The lower the ratio, the greater the long-term financial safety. A firm with a low debt/worth ratio usually has a greater flexibility to borrow in the future. A more highly leveraged company has a more limited debt capacity. Debt/worth ratio=Total Liabilities / Tangible Net Worth

 PROFITABILITY RATIO Profitability ratios are gauges of the company's operating success for a given period of time.

54

• Return On Assets: Return on assets is a measure of how effectively the firm’s assets are being used to generate profit. It is calculated as follows: Return On Assets= Net Income/Total Assets • Return On Equity: Return on equity is the bottom line measure for the shareholders, measuring for the profits earned for each rupee invested in business. It is calculated as follows: Return on Equity= Net income/shareholder’s equity

 Fixed/Worth Ratio: This ratio measures the extent to which owner’s

equity (capital) has been invested in plant and equipment (fixed assets). A lower ratio indicates a proportionately smaller investment in fixed assets in relation to net worth and a better cushion for creditors in case of liquidation. Similarly, a higher ratio would indicate the opposite situation. The presence of substantial leased fixed assets (not shown on balance-sheet ) may deceptively lower this ratio. Fixed Worth Ratio=Net Fixed Assets/ Tangible Net Worth

55

the

FINDINGS

56

5.1 MANAGEMENT DISCUSSION & ANALYSIS Summary •

Profit before provisions and tax increased by 35.5% to Rs. 79.61 billion

in fiscal 2008 from Rs. 58.74 billion in fiscal 2007 primarily due to an increase in net interest income by 29.6% to Rs. 73.04 billion in fiscal 2008 from Rs. 56.37 billion in fiscal 2007 and an increase in non-interest income by 27.2% to Rs.88.11 billion in fiscal 2008 from Rs. 69.28 billion in fiscal 2007, offset, in part, by an increase in non-interest expenses by 21.9% to Rs. 81.54 billion in fiscal 2008 from Rs. 66.91 billion in fiscal 2007. Provisions and contingencies (excluding provision for tax) increased by 30.5% during fiscal 2008 primarily due to a higher level of specific provisioning on nonperforming loans, offset, in part by a reduction in general provision on loans. Profit before tax increased by 38.6% to Rs. 50.56 billion in fiscal 2008 from Rs. 36.48 billion in fiscal 2007. Profit after tax increased by 33.7% to Rs. 41.58 billion in fiscal 2008 from Rs. 31.10 billion in fiscal 2007. •

Net interest income increased by 29.6% to Rs. 73.04 billion in fiscal 2008

from Rs. 56.37 billion in fiscal 2007, reflecting an increase of 27.6% or Rs. 711.07 billion in the average volume of interest-earning assets and an

57

increase in net interest margin to 2.22% in fiscal 2008 compared to 2.19% in fiscal 2007. •

Non-interest income increased by 27.2% to Rs. 88.11 billion in fiscal

2008 from Rs. 69.28 billion in fiscal 2007 primarily due to a 32.2% increase in fee income and a 14.0% increase in treasury and other non-interest income. •

Non-interest expenses increased by 21.9% to Rs. 81.54 billion in fiscal

2008 from Rs. 66.91 billion in fiscal 2007 primarily due to a 28.6% increase in employee expenses and a 31.6% increase in other administrative expenses. •

Provisions and contingencies (excluding provision for tax) increased to

Rs. 29.05 billion in fiscal 2008 from Rs. 22.26 billion in fiscal 2007 primarily due to higher level of specific provisioning on retail loans due to change in the portfolio mix towards non-collateralised loans and seasoning of the loan portfolio, offset in part by a reduction in general provision on loans due to lower growth in the loan portfolio relative to fiscal 2007. •

Total assets increased by 16.0% to Rs. 3,997.95 billion at year-end fiscal

2008 from Rs. 3,446.58 billion at year-end fiscal 2007 primarily due to an increase in advances by 15.2% and an increase in investments by 22.1%. •

During the year, we made a follow-on public offering of equity shares in

India and an issuance of American Depository Shares (ADSs) aggregating to Rs. 199.67 billion. •

The Sangli Bank Limited (Sangli Bank) was amalgamated with ICICI

Bank with effect from April 19, 2007 in terms of the scheme of amalgamation approved by Reserve Bank of India (RBI) vide its order DBOD No. PSBD 10268/16.01.128/2006-07 dated April 18, 2007 under section 44A (4) of the Banking Regulation Act, 1949. Sangli Bank was a banking company incorporated under the Companies Act, 1956 and licensed by RBI under the Banking Regulation Act, 1949. The consideration for the 58

amalgamation was 100 equity shares of ICICI Bank of face value Rs. 10 each fully paid-up for every 925 equity shares of face value of Rs. 10 each of Sangli Bank. Accordingly, on May 28, 2007, ICICI Bank allotted 3,455,008 equity shares of Rs. 10 each, credited as fully paid up, to the shareholders of Sangli Bank. The excess of the paid-up value of the shares issued over the fair value of the net assets acquired (including reserves) of Rs. 3.26 billion and amalgamation expenses of Rs. 0.22 billion have been deducted from the securities premium account.

5.2 COMPARATIVE INCOME STATEMENT TREND ANALYSIS SUMMARISED PROFIT & LOSS A/C (ON 31 MARCH, 2008)

59

By anlysing the summarized profit & loss account of ICICI Bank, the following trends are presented:  Operating profit increased to Rs. 79.61 Billion for FY2008 from Rs. 58.74 Billion for FY2007 which is less than as compared to increased to Rs. 5,874 crore for FY2007 from Rs. 3,888 crore for FY2006

60

 Profit after tax increased to Rs. 41.58 Billion for FY2008 from Rs. 31.10 Billion for FY2007 which is less than as compared to increased to Rs 3,110 crore for FY2007 from Rs. 2,540 crore for FY2006.  Profit before tax increased to Rs. 50.56 Billion for FY2008 from Rs. 36.48 Billion for FY2007 which is also less than as compared to increased to Rs. 3,648 crore for FY2007 from Rs. 3,097 crore for FY2006.  Total interest income increased by 37.8% to Rs. 316.86 billion in fiscal 2008 from Rs. 229.94 billion in fiscal 2007 and interest income, net of amortisation on Government securities, increased by 40.0% to Rs. 307.88 billion in fiscal 2008 from Rs. 219.95 billion in fiscal 2007 primarily due to an increase of 27.6% in the average interest earning assets and an increase of 83 basis points.  Fee income increased by 32.2% to Rs. 66.27 billion in fiscal 2008 from Rs. 50.12 billion in fiscal 2007 primarily due to growth in fee income from structuring and advisory fees, fees from international operations, third party distribution fees.  Total non-interest expense increased by 21.9% to Rs. 81.54 billion in fiscal 2008 from Rs. 66.91 billion in fiscal 2007 primarily due to a 28.6% increase in employee expenses and 31.6% increase in other administrative expenses.  Interest income is increased at a higher rate than the previous year i.e. 47% in 2007 to 61% in 2008.  Increase in non-interest income is less than in 2008 49% as compared to increase in 2007 39%.  Provisions and contingencies (excluding provision for tax) increased to Rs. 29.05 billion in fiscal 2008 from Rs. 22.26 billion in fiscal 2007

5.3 COMPARATIVE FINANCIAL POSITION STATEMENT

61

TREND ANALYSIS SUMMARIZED BALANCE-SHEET (ON MARCH 31, 2008)

By anlysing the balance sheet of ICICI Bank, the following trends are presented: 62



Our total assets increased by 16.0% to Rs. 3,997.95 billion at year-

end fiscal 2008 from Rs. 3,446.58 billion at year-end fiscal 2007.



Increase in cash balance with bank in 2008 is more than in the

previous year 2007. In 2007 it is Rs.371.21 Billion and in 2008 it is Rs.380.41 Billion



But increase in SLR investment in 2008 is also more than the

previous year. In 2007 it is 673.68 Billion and in 2008 it is 750.31 Billion.



Increase in advances in 2008 from Rs 2256.16 Billion to

Rs1958.66 Billion in 2007.



Increase in fixed and other assets is also less than in 2008 from

2007 i.e 23% as compared to 30% in 2007 from 2006.



Erstwhile ICICI borrowings is decreasing in both years but rate of

decreasing is less in 2008 i.e. 18% but in 2007 it is 31%.



Increase in net worth is also less than from previous year in 2008

i.e 80% in 2007 to 9% in 2008.



Our equity share capital and reserves at year-end fiscal 2008

increased to Rs. 464.71 billion as compared to Rs. 243.13 billion at yearend fiscal 2007



Total deposits increased by 6.0% to Rs. 2,444.31 billion at year-

end fiscal 2008 from Rs. 2,305.10 billion at year-end fiscal 2007.

63



Increase in other liabilities is more in 2008 than in 2007 i.e from

14% in 2007 to 25% in 2008.



69%borrowing is increased in 2008 from 2007 which is more than

as compared to 58% increase in borrowing in 2007 from 2006.

5.4 RATIO ANALYSIS 1) CURRENT RATIO: 64

Current Ratio= Current Assets/Current Liabilities In 2008: Current Assets=380.41+2256.16=2636.57 billion (cash + advances) Current

Liabilities=246.91+863.99=1109.9billion

(short-term

deposits+

borrowings) Current Ratio=2636.57/1109.9=2.4:1 In 2007: Current Assets=371.21+1958.66=2329.87billion (cash + advances) Current

Liabilities=213.76+108.37+598.23=920.36

deposits+ borrowings) Current Ratio=2329.87/920.36=2.6:1 2) QUICK RATIO: Quick Ratio=Quick Assets/Current Liabilities In 2008: Quick Assets=380.41billion (cash in hand and other bank) Current Liabilities=1109.9billion Quick Ratio=380.41/1109.9=0.40:1

In 2007: Quick Assets=371.21billion (cash in hand and other bank) Current Liabilities=920.30billion Quick Ratio=371.21/920.30=0.40:1

3) RETURN ON AVERAGE ASSETS: 65

billion

(short-term

Return on average assets= Net income/average assets*100 average assets= total assets at the beginning + total assets at the end/2 In 2008: net income=25.40 billion Average assets= (1676.59+ 2513.89)/2= 2095.24 Return on average assets= 25.40/2095.24*100 = 1.21% In 2007: net income= 31.10 billion Average assets= (2513.89+ 3446.58)/2= 2980.24 Return on average assets= 31.10/2980.24*100=1.04% 4) RETURN ON AVERAGE EQUITY: Return on average equity = Net income/average equity*100 average equity= total equity at the beginning + total equity at the end/2 In 2008: net income=25.40 billion Average equity= (129.00+225.56)/2= 177.28 Return on average equity= 25.40/177.28*100 = 17.54% In 2007: net income= 31.10 billion Average equity= (225.56+246.63)/2= 236.10 Return on average equity = 31.10/236.10*100=13.17% 5) FIXED/WORTH RATIO: Fixed Worth Ratio=Net Fixed Assets/ Tangible Net Worth In 2008: Net Fixed Assets= 39.80 billion Tangible Net Worth= 225.55 billion Fixed Worth Ratio=39.80/225.55= 0.18:1

In 2007: 66

Net Fixed Assets= 39.23 billion Tangible Net Worth= 246.62 billion Fixed Worth Ratio=39.23/246.62 = 0.16:1 6) OPERATING PROFIT TO WORKING FUNDS Operating Profit To Working Funds=operating profit/ average assets*100 In 2008: Operating profit=38.80 billion Average assets=2095.24 Operating profit to working fund=38.80/2095.24*100= 1.85% In 2007: Operating profit=58.84 billion Average assets=2980.84 Operating profit to working fund=58.84/2980.84*100= 1.98% (approximately)

RATIOS

IN 2008

IN 2007

Current Ratio

2.4:1

2.6:1

Quick Ratio

0.40:1

0.40:1

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Return On Assets

1.21%

1.04%

Return On Equity

17.54%

13.17%

Fixed/worth Ratio

0.18:1

0.16:1

Operating profit to working funds

1.85%

1.98%

The above table shows that:- both current ratio and quick ratio is liquidity ratio. The ideal ratio for current ratio is 2:1 and ideal ratio for quick ratio is 1:1. In these table current ratio of both year is higher than the ideal ratio which shows that there is enough current assets which make the bank able to pay its current liabilities on time but quick ratio is lower than the ideal ratio which shows that bank have not enough liquid assets to pay their current liabilities. Therefore bank should keep some assets in the form of liquid assets such as cash, marketable securities etc. Return on equity, return on assets and operating profit to working funds are profitability ratio. The higher the profitability ratio of any organization is show the better position of that organization. The profitability ratio of ICICI bank is very low. It is deceasing from the previous year. Fixed/worth ratio measures the extent to which owner’s equity has been invested in plant and equipment . A lower ratio indicates a proportionately smaller investment in fixed assets. This ratio shows that bank has invested more in current assets than the fixed assets. It could be a good position in case of liquidation.

5.5 CASH FLOW STATEMENT

68

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CONCLUSION AND SUGGESTIONS

CONCLUSION 70

The balance-sheet along with the income statement is an important tools for investors and many other parties who are interested in it to gain insight into a company and its operation. The balance sheet is a snapshot at a single point of time of the company’s accounts- covering its assets, liabilities and shareholder’s equity. The purpose of the balance-sheet is to give users an idea of the company’s financial position along with displaying what the company owns and owes. It is important that all investors know how to use, analyze and read balance-sheet. P & L account tells the net profit and net loss of a company and its appropriation.

In the case of ICICI Bank, during fiscal 2008, the bank continued to grow and diversify its assets base and revenue streams. Bank maintained its leadership in all main areas such as retail credit, wholesale business, international operation, insurance, mutual fund, rural banking etc. Continuous increase in the number of branches, ATM and electronic channels shows the growth take place in bank.

Trend analysis of profit & loss account and balance sheet shows the % change in items of p & l a/c and balance sheet i.e. % change in 2006 from 2005 and % change in 2007 from 2006. It shows that all items are increased mostly but increase in this year is less than as compared to increase in previous year. In p & l a/c, all items like interest income, non-interest income, interest expenses, operating expenses, operating profit, profit before tax and after tax is increased but in mostly cases it is less than from previous year but in some items like interest income, interest expenses, provision % increase is more. Some items like tax, depreciation, lease income is decreased. Similarly in balance sheet all items like advances, cash, liabilities, deposits is increased except borrowings which is decreased. % increase in some item is more than previous year and in some items it is less.

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Ratio analysis of financial statement shows that bank’s current ratio is better than the quick ratio and fixed/worth ratio. It means bank has invested more in current assets than the fixed assets and liquid assets. Bank have given more advances to its customer and they have less cash in their hand. Profitability ratio of bank is lower than as compared to previous year. Return on equity is better than the return on assets.

The cash flow statement shows that net increase in cash generated from operating and financing activities is much more than the previous year but cash generated from investing activities is negative in both year. There is increase of 159,708,479 thousand RS. in Increase in cash & cash equivalents from previous year. Therefore analysis of cash flow statement shows that cash inflow is more than the cash outflow in ICICI Bank.

Thus, the ratio analysis and trend analysis and analysis of cash flow statement shows that ICICI Bank’s financial position is good. Bank’s profitability is increasing but not at high rate. Bank’s liquidity position is fair but not good because bank invest more in current assets than the liquid assets. As we all know that ICICI Bank is on the first position among all the private sector bank of India in all areas but it should pay attention on its profitability and liquidity. Bank’s position is stable.

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SUGGESTIONS Some of the recommendation and suggestion are as follows: o The attention is required on the areas of growth, profitability ,service level and building talent. o To increase the profit of bank, bank should decrease their operating expenses and increase their income. o To increase its liquidity, bank should keep some more cash in its hand instead of giving more and more advances. o Introduce quality consciousness and standardization of the work system and procedures. o Make manager competitive and introduce spirit of market-orientation and culture of working for customer satisfaction. o There is need to build the knowledge and skill base among the employees in the context of technology. o Performance measure should not only cover financial aspects i.e. quantitatively aspects but also the qualitative aspects. o It is high time to focus on work than the work-achieved. o Bank should increase its retail portfolio. o Bank should manage its all risk such as credit, market and operational risk properly and should be managed by a person who are highly skilled and qualified. o Bank should pay attention on its subsidiary “ICICI Prudential Life Insurance Company Limited”

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BIBLOGRAPHY

74

BIBLOGRAPHY

75

ANNEXURE

76

PROFIT AND LOSS A/C

77

BALANCE-SHEET 

78