Union Bank of India Achievements of business goals (2010-2011)

y Global Business up from 291289cr. to 355483cr. an increase of 22.04% y Domestic Deposits up from 169670cr. to 201891cr. an increase of 18.99% y Domestic Advances up from 118272 cr. to 147081 cr. an increase of y 24.36%. y Robust growth of 48.28% in Net Interest Income from 4192cr. to 6216cr. y Net Interest Margin improved by 62 bps from 2.71% to 3.33%. y Gross NPA ratio decreased to 2.37% from 2.79% in September 2010.

Financial Results FY 2011

Operating Profit & Net Profit y Operating profit had a growth of 17.66%. Last year it was 3659cr. and this year it is 4305cr. The Banks operating profit has been consistently growing. The one-off expenditure expense of pension liability of Rs 300 crs has dented the Operating profit growth which otherwise would have been 25.85%. y Increased provisions on NPAs (Rs 1188 cr. Vs 699 cr.) together with one-off expenditure on pension liability has pulled down the Net Profit of the Bank. NPA had a minor growth of 0.34%.

NET INTEREST INCOME

y Net Interest Income grew by 48.28% YoY to Rs 6216crs from Rs 4192 crs in the previous year.

y NII growth has been driven mainly due to increase in yield on funds at 8.33% as against 8.04% in the previous year and reduction in cost of funds to 5.19% from 5.51% in the previous year.

IMPROVED PRODUCTIVITY Ratios

Productivity Ratios Business per Employee Business per Branch Net Profit per Employee Net Profit per Branch Gross Profit per Employee Gross Profit per Branch 1049 10385 7.47 73.97 13.18 130.46 1281 11783 7.50 69.01 15.52 142.69

MARCH(2010) March(2011)

CAPITAL ADEQUACY RATIO Capital Adequacy ratio is 12.95% as of 31st March 2011. Last year it was

12.51%

Tier-I Capital Adequacy ratio has improved to 8.69% from 7.91 % mainly due to plough back of profits and infusion of capital of Rs. 682 crore and Rs 111 crore from Govt. of India. In Tier-II Capital Adequacy ratio has decreased from 4.60%(2010) to 4.26%(2011).

Guidance 2011-12
1. The Bank aims for a deposits growth of approx. 20% and advances growth of 22% for 2011-12. 2. Return on Average Assets to be 1.30% by March 2012. 3. NIM is expected to be at 3.20% by March 2012.

4. Delinquency Ratio as of 31st March,2012 is expected to be 1.25%. 5. Gross NPAs of the Bank are expected to be around 1.85% by March 2012. 6. Bank proposes to open 400 branches and increase the total number of ATMs to 5000 during the year 2011-12.

Our objective of creating a universal bank providing end-to-end financial services, clearly required solutions which were based on new-generation technology, offered end-to-end functionality and were highly flexible and scalable. Finacle offered all this and much more. By: Chanda Kochhar Joint Managing Director ICICI Bank Limited

Case Study
Performance Review Quarter and year ended March 31, 2011 44% year-on-year increase in standalone profit after tax to 1,452 crore (US$ 326 million) for the quarter ended March 31, 2011 from 1,006 crore (US$ 226 million) for the quarter ended March 31, 2010 28% increase in standalone profit after tax to ` 5,151 crore (US$ 1.2 billion) for the year ended March 31, 2011 from 4,025 crore (US$ 903 million) for the year ended March 31, 2010 30% year-on-year increase in consolidated profit after tax to 6,093 crore (US$ 1.4 billion) for the year ended March 31, 2011 from 4,670 crore (US$ 1.0 billion) for the year ended March 31, 2010 Current and savings account (CASA) deposit ratio increased to 45.1% at March 31, 2011 from 41.7% at March 31, 2010 Net non-performing asset ratio decreased to 0.94% at March 31, 2011 from 1.87% at March 31, 2010 and 1.16% at December 31, 2010 Provision coverage ratio increased to 76.0% at March 31, 2011 from 59.5% at March 31, 2010 and 71.8% at December 31, 2010 Strong capital adequacy ratio of 19.54% and Tier-1 capital adequacy of 13.17% Increase in dividend to 14 per share proposed.

Profit & Loss Account: Profit after tax increased 44% to 1,452crore (US$ 326 million) for the quarter ended March 31, 2011 (Q4-2011) from 1,006crore (US$ 226 million) for the quarter ended March 31, 2010 (Q4-2010). Net interest income increased 23% to 2,510crore (US$ 563 million) in Q4-2011 from 2,035crore (US$ 456 million) in Q4-2010. Fee income increased 18% to 1,791crore (US$ 402 million) in Q4- 2011 from 1,521crore (US$ 341 million) in Q4-2010. Provisions decreased 61% to 384crore (US$ 86 million) in Q4-2011 from 990crore (US$ 222 million) in Q4-2010. Profit after tax for the year ended March 31, 2011 (FY2011) increased 28% to 5,151crore (US$ 1.2 billion) from 4,025crore (US$ 903 million) for the year ended March 31, 2010 (FY2010). Operating review The Bank has continued with its strategy of pursuing profitable growth. In this direction, the Bank continues to leverage its strong corporate franchise, its international presence and its expanded branch network in India. At March 31, 2011, the Bank had 2,529 branches and 6,104 ATMs, the largest branch network among private sector banks in the country. Credit growth Advances increased by 19% year-on-year to 216,366crore (US$ 48.5 billion) at March 31, 2011 from ` 181,206crore (US$ 40.6 billion) at March 31, 2010. Deposit growth Savings deposits increased by 26% year-on-year to 66,869crore (US$ 15.0 billion) at March 31, 2011 from 53,218crore (US$ 11.9 billion) at March 31, 2010 and the CASA ratio increased to 45.1% at March 31, 2011 from 41.7% at March 31, 2010. Capital adequacy The Banks capital adequacy at March 31, 2011 as per Reserve Bank of Indias revised guidelines on Basel II norms was 19.54% and Tier-1 capital adequacy was 13.17%, well above RBIs requirement of total capital adequacy of 9.0% and Tier1 capital adequacy of 6.0%.

Asset quality Net non-performing assets decreased 37% to 2,459crore (US$ 551 million) at March 31, 2011 from 3,901crore (US$ 875 million) at March 31, 2010 (2,873crore (US$ 644 million) at December 31, 2010). The Banks net non-performing asset ratio decreased to 0.94% at March 31, 2011 from 1.87% at March 31, 2010 and 1.16% at December 31, 2010. The Banks provisioning coverage ratio computed in accordance with RBI guidelines at March 31, 2011 was 76.0% compared to 59.5% at March 31, 2010 and 71.8% at December 31, 2010. Dividend on equity shares The Board has recommended a dividend of 14 per equity share (equivalent to US$ 0.63 per ADS) for FY2011. The declaration and payment of dividend is subject to requisite approvals. The record/book closure dates will be announced in due course. Consolidated profits Consolidated profit after tax of the Bank increased by 30% to 6,093crore (US$ 1.4 billion) in FY2011 from 4,670crore (US$ 1.0 billion) in FY2010. Consolidated profit after tax for Q4-2011 increased 17% to 1,568crore (US$ 352 million) compared to 1,342crore (US$ 301 million) for Q4-2010. The consolidated profits for FY2011 and Q4-2011 include the impact of additional motor pool losses on ICICI Lombard General Insurance Company (ICICI General) pursuant to the Insurance Regulatory and Development Authority (IRDA) order dated March 12, 2011, requiring all general insurance companies to provide for motor pool losses at a provisional loss ratio of 153% for all years commencing from the year ended March 31, 2008, compared to the earlier loss ratios of 122-127%. The profits of ICICI General include an impact of about 272crore (US$ 61 million) and the consolidated profits of the Bank include an impact of about 200crore (US$ 45 million) (in line with the Banks shareholding in ICICI General) on account of the above. Indian Motor Third Party Insurance Pool is an industry pool created for providing third party insurance to commercial vehicles. The results of the pool are shared by the general insurance companies in proportion to their overall market share. Results for Q4-2011 and FY2011 take into account the impact of amalgamation of erstwhile Bank of Rajasthan from close of business on August 12, 2010

ICICI Bank is India's second-largest bank with total assets of Rs. 4,062.34 billion (US$ 91 billion) at March 31, 2011 and profit after tax Rs. 51.51 billion (US$ 1,155 million) for the year ended March 31, 2011. The Bank has a network of 2,533 branches and 6,301 ATMs in India, and has a presence in 19 countries, including India. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a variety of delivery channels and through its specialised subsidiaries 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 United States, Singapore, Bahrain, Hong Kong, Sri Lanka, Qatar and Dubai International Finance Centre and representative offices in United Arab Emirates, China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia. Our UK subsidiary has established branches in Belgium and Germany. ICICI Bank's equity shares are listed in India on Bombay Stock Exchange and the National Stock Exchange of India Limited and its American Depositary Receipts (ADRs) are listed on the New York Stock Exchange (NYSE). history History 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 mediumterm 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 low-cost 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 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 Court of Gujarat at Ahmedabad in March 2002, and by the High Court 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.

DISADVANTAGES IN UNIVERSAL BANKING:1. To meet with the increasing demands of customers. The establishment of new private sector banks and foreign banks have rapidly changed the competitive landscape in the Indian consumer banking industry and placed greater demands on banks to gear themselves up to meet the increasing needs of customers. For the dissatisfied current day bank customers, it is not only relevant to offer a wide menu of services but also provide these in an increasingly efficient manner in terms of cost, time and convenience. E.g.: Today there is a lot of burden on staff members, they are given no or less number of bank holidays, the time limit is 8-8. 2. Merger with DFI {Biggest Challenge}. Development Financial Institutions (DFIs) opting for conversion into Universal Banks by merger/reverse merger routes may also face certain difficult situations on account of Asset Liability Mismatches, burden of mounting NPAs and differences in regulatory prescriptions applicable to FIs and banks such as CRR and SLR requirements and priority sector lending. The asset profile of DFIs in India is predominately of long-term nature, which also includes a very high level of non-performing assets. E.g.: NPAs of ICICI and IDBI were transferred to ICICI Bank and IDBI Bank respectively after their merger. 3. Statutory Liquid Ratio {SLR} and Cash Reserve Ratio {CRR} requirements of DFI In case DFIs are converted into banks they would also be subject to the reserve requirement like banks. CRR and SLR burden that wasn't there for DFI will be applied after its merger with any bank. This would mean that all liabilities issued by the DFIs in the past would also be subject to reserve requirements and since the assets structure of DFIs are largely of long term nature it would be very difficult for them to maintain the required level of SLR/CRR. 4. High cost of funds for DFI. Cost of deposits is high as the only source of funds is Fixed Deposits having higher Rate of Interest. Costs of funds for Fixed Deposit are higher than CASA {Current account Savings account}. CASA has low cost, as the Rate of Interest is low. Further,

the cost at which DFIs have been raising resources in the past has generally remained high as compared to banks and maintenance of CRR/SLR of such liabilities, which may earn lower returns, would adversely affect the profitability of Universal Banks. Compliance of priority sector lending norms, which earn lower returns, may also create difficult situations for such bank. Risk Management is one of the major challenges, where in the financial activity carries with it various risks, which would need to be identified, measured, monitored and controlled by Universal Banks. The nature of risks and mitigating techniques for different financial product/services will be different and therefore, Universal Banks will be required to develop comprehensive system of each product/service and each kind of risk. 5. Improving risk management systems. With the increasing degree of deregulation and exposure of banks to various types of risks, efficient risk management systems have become essential. For enhancing the risk management system in banks, Reserve Bank has issued guidelines on asset liability management and risk management systems in banks in1999 and Guidelines Notes on Credit Risk Management and Market Risk Management in October 2002 and the Guidance Note on Operational risk management in 2005.

I. Supervisory and regulatory infrastructure. Another aspect is related to building up of supervisory infrastructure. The regulatory framework would need to be strengthened so as to cover all aspects of Universal Banking either under control of one regulator or a co-coordinating mechanism would have to be developed among different regulators like the Reserve Bank of India, SEBI, Insurance Regulatory, Authority etc. The regulators will have to frame sound mechanism to protect the interest of all concerned including the customer, the Universal Banking Institution and the financial system of the country. II. Supervisory of financial conglomerates. In view of increased focus on empowering supervisors to undertake consolidated supervision of bank groups and since the Core Principle for Banking Supervisory issued by the BASEL committee on Banking Supervision have underscored consolidated supervision as an independent principle, the Reserve Bank of India had introduced, as an initial step, consolidated accounting and other quantitative methods to facilitate consolidated supervision. The components of consolidated supervision include, consolidated financial statements intended for public disclosure, consolidated prudential reports intended or supervisory assessment of risk and application of certain prudential regulations on group basis. In due course, consolidated supervision as introduced above would evolve to cover. III. Technology improvement and compensation and incentive systems for employees. It is likely that Universal Banks of roughly the same size and providing roughly the same range of services may have very different cost levels per unit of output on account of efficiency differences in the use of labour and capital, effectiveness in the sourcing and application of available technology, and perhaps effectiveness in the acquisition of productive inputs, organization designs, compensation and incentive system-and just plain better management.

IV. Conflict of interest between commercial and investment banking. Larger the banks, the greater will be the effects of the failure on the system. Also there is the fear that such institutions, by virtue of their sheer size would gain monopoly power in the market, which can have undesirable consequences for economic efficiency. Further combining commercial and investment banking can give rise to conflict of interest. 10. Sharpening skills. The far-reaching changes in the banking and financial sector entail a fundamental shift in the set of skills required in banking. To meet increased competition and manage risk, the demand for specialized banking functions, using IT, as a competitive tool has to go up. Special skills in retail banking, treasury, risk management, foreign exchange, development banking, etc, will need to be carefully nurtured and built. Thus, the twin pillars of the banking sector i.e. human resource and IT will have to be strengthened. Thus the need of the day is a combination of improved technology and quality human resources. 11. Competition Monopolistic competition among universal banks will decrease their profit margin. 12. Government interferences Interferences by government in public sector banks through RBI are hampering progress of universal banks. 13. Present economic recession Recession is affecting universal banks in a big way as their investment in infrastructure as well as the establishment expenses is much higher as compared to public sector banks.