ICICI Bank

STRATEGIC ANALYSIS
AGENDA
INTRODUCTION CAPT BHARDWAJ
EXTERNAL ANALYSIS
PESTEL COL BHARDWAJ
PORTERS FIVE FORCES COL BHARDWAJ
COMPETITION ANALYSIS LT CDR JAGADEEP
INTERNAL ANALYSIS
SWOT - LT CDR JAGADEEP
BCG MATRIX LT CDR CHETAN
INTERNAL ANALYSIS LT CDR CHETAN
WAY AHEAD/ RECOMMENDATIONS (Corporate level
STRATEGY, Generic STRATEGY, Market penetration
STRATEGY, Product development STRATEGY, Diversification
STRATEGY) WG CDR NIVEDITA/ CDR SWAPNIL SHELLY
HISTORY
ICICI Bank traces back its origin to 1955 when, at the
initiative of World Bank, the Government of India and
representatives of Indian industry, The Industrial Credit
and Investment Corporation of India Limited (ICICI) was
incorporated with the objective of providing long-term
and medium-term project financing to Indian
businesses (Exhibit 1). In 1955 ICICI acted as a primary
source of foreign currency in the Indian Market.
Funding from World Bank, GOI, and other multilateral
sources not withstanding ICICI was also one of the first
Indian companies to raise funds from international
markets. In 1956 itself the company declared its first
dividend of 3.5%. Spreading Wings:...
ICICI was originally promoted in 1994 by ICICI
ltd.
ICICIs shareholding in ICICI bank was reduce
to 46% through a public offering of shares in
India in 1998.
Vision Statement

To be the leading provider of financial services
in India and a major global bank.



Mission Statement
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 Indias 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.

SERVICES/ PRODUCTS

EXTERNAL ANALYSIS
PESTEL ANALYSIS
PORTERS FIVE FORCES ANALYSIS
INDUSTRY/ COMPETITION ANALYSIS

MACROECONOMIC ANALYSIS PESTEL
FRAMEWORK
Political
Economic
Social
Technological
Environmental
Legal
POLITICAL ANALYSIS
Banking industry highly regulated in India
Statutory requirements changed from time to
time to control inflations
Safe environment for Banking.


POLITICAL ANALYSIS
CRAR Capital to Risk Weighted Assets Ratio.





Min required for private banks 10%, public
banks 9%
ECONOMIC ANALYSIS
GDP - Indian Economy second fastest growing
economy in the world


ECONOMIC ANALYSIS
YOY Growth of Banks






Growth rate in PAT 30% indicates banking
industry still in growth phase of life cycle in India
SOCIAL FACTORS
Rising population of middle class
Rising income of individuals
Growing standards of living, demand for loans
for houses, business, etc
Private banks starting operations in rural areas
Ample scope for covering large population by
banking sector
SOCIAL FACTORS
Non performing assets (NPA) ratio






NPA level of Indian banks is well below RBI
guideline of 10%

TECHNOLOGICAL AND
ENVIRONMENTAL FACTORS
Fast, efficient banking, and easily accessible
Internet banking, mobile banking, CRM, etc
Time and cost effective
Focus on facilitating green banking
Online banking system leading to paperless
banking

LEGAL FACTORS
Reserve bank of India apex authority for
controlling all the legal aspects of banking
Fixes the bench mark standard of capital adequacy
and prudential norms for key performance areas
and thereby ensures the soundness in the system.
Formulation of best practices in the areas of risk
management, provisioning, disclosures and credit
delivery.
Adoption of good corporate governance system.

LEGAL FACTORS
The development of institutional framework for
the benefit of the customers.
Regulates the entry and exit borders in case of
cross border institutions.
It helps to integrate the various financial systems
and keep the system contemporary and
competitive.


Porters 5 Forces
Threat of new entrants
Threat of rivalry
Threat of Substitutes
Bargaining powers of the suppliers
Bargaining powers of the buyers



Threat of new entrants
Based on the entry barriers in the market.
Starting a bank in India is comparatively
difficult as compared to other industries
Threat of new entrants- Low

THREAT OF RIVALRY
Traditional channels still play a very important
role especially in rural areas
Presence of both public and private players
urban areas
Greater confidence of public in established
banks like SBI
Threat of Competitive rivalry - High
THREAT OF SUBSTITUTES
Rural areas - money lenders, Regional Rural
banks, Non- banking financial corporations.
Urban areas - investment firms, brokerage
firms, brokers, etc
Most of the above fail to match the sheer
economies of scale and quality of services
The Threat of Substitutes - MEDIUM


BARGAINING POWERS OF SUPPLIERS
The suppliers of capital not a big threat
Human resource
Bargaining powers of the suppliers - MEDIUM

Bargaining power of buyers
Switching of financial services high
Financial institutions work hard to get high-
margin corporate clients
Specialized products for Women and Students
Bargaining powers of the buyers - HIGH
Porters 5 Forces
Threat of new entrants- Low
Threat of rivalry- High
Bargaining powers of the suppliers- MEDIUM
Bargaining powers of the buyers- HIGH
Threat of Substitutes - MEDIUM



Porters 5 Forces Model
COMPETITION ANALYSIS- CAMELS
FRAMEWORK
Canara Bank
Axis Bank
HDFC Bank
Yes Bank
Standard Chartered Bank
On the basis of the unique shareholding
pattern

Canara Bank-Government (major share solder)
ICICI bank-Foreign Financial Institutions -66%
Axis Bank-Indian and Foreign Financial
Institution. 46% and 42% respectively.
HDFC Bank-Corporate. Both Indian and
Foreign Corporates are major shareholder of
this bank.
Yes Bank is unique. A quarter of its shares are
held by Indian individuals.
Standard Chartered is a foreign bank
CAMELS FRAMEWORK
CAMELs framework gives a broader insight on
the position of a bank
C- CAPITAL ADEQUACY
A-ASSET QUALITY
M-MANAGEMENT
E- EARNINGS
L- LIQUIDITY
S- SENSITIVITY


CAPITAL ADEQUACY
Capital to Risk Weighted Asset Ratio: (CRAR)
High value of CRAR means higher level of
safety for banks
CRAR = (Total Capital Fund)/ (Risk Weighted
Assets)
Minimum in India as per RBI guidelines 09 %
Debt Equity Ratio = (Borrowings)/ (Capital +
Reserve and Surplus)

Advances to Total Asset Ratio = Advances/
Total Assets
This ratio show, what amount of assets has
been given as advances.
Advances are directly responsible for the
profit.
Thus a higher ratio of advance to assets is
preferred than a lower one.
Canara Bank was very slow to changes in
the Banking sector
ICICI Bank saw decrease in 2009 due to
unfavorable economic conditions.
This decreased the advances to total asset
ratio

ASSET QUALITY
Asset quality has direct impact on the
performance of the bank.
Appreciation or depreciation of the value of
assets is dependent on market conditions.
AQ depends on risk management system of
the bank (ex. Loans , investments)
To measure the AQ one have to look at the
Non Performing Assets of the bank


The parameters describing AQ of a bank are
Gross NPA to Advances ratio= Gross NPA/
Advances
Gross NPA gives the exact amount of NPA in
that year as provisions are not deducted from
it
Provides the vital information of how the
assets performed in that year

Standard Chartered Bank incurred huge
losses due to NPA in India
Net NPA to Advances = Net NPA/ Advances
It gives the information regarding the
performance of total assets combining the
provisions also.


Canara Bank is most conservative player in the
field is having the lowest value.
Axis bank through large amount of provision
has managed to lower the net NPA to total
advances to acceptable level.
Standard Chartered credit policy of giving
short term loan is mainly responsible for its
high Net NPA to total advances ratio.
MANAGEMENT
Management plays a vital role in the
functioning of banks
management rating is just an amalgam of
performance in vision, capability, agility ,
integrity, and competence of the bank's
management

Advance to deposit ratio = Total advance/
Total deposits
It tells how much deposit has been given as
advances to others.
Advances are necessary to earn profit and
service the interest being paid to the deposits.





Icici bank and standard chartered bank which
have aggressive policy from the beginning
itself has a large amount of advances w.r.t
their deposits.
Profit per employee indicates the average
profit generated per person employed
A good management will motivate employee
to earn more profit for the bank
EARNINGS
The ultimate aim of any financial institution is
to increase its bottom line and bring profit to
the stakeholders
Support present and future operations
Good earnings performance would inspire
the confidence of depositors, investors,
creditors, and the public at large
The parameters defining earnings are
ROAA (return on average assets)
Gives indication as to how much profit a bank
is able to generate per unit assets.
ROAA is calculated at period ends (in this case
year end), it does not reflect all of the
highs/lows but is merely an average of the
period
ROAA of Axis bank and HDFC bank is very high.
Since ICICI bank is expanding its base in the rural
areas, its return on average asset is maintained
around 1%
Interest Income to Total Income
Interest is a major source of revenue
Interest income holds 70 -80 % weightage for
most of the banks
Earning per share The profit a common stock
holder earns
LIQUIDITY
To meet the demands of the customers banks
must maintain liquidity in their asset
This is done by an effective mechanism called
the Asset and Liability Management
It minimizes maturity mismatches between
assets and liabilities and optimize returns
indicators used - credit to deposit ratios and
cash to deposit ratio

Credit Deposit Ratio: This ratio gives the
information of how much of the deposit has
been given away as credit
This in turn reduces the liquidity of the banks
Cash Deposit Ratio
Large volume of the cash in the system is
harmful for the profit of the bank
On an average Banks in India maintains 0.50%
cash in hand to the deposit that they have
INTERNAL ANALYSIS
SWOT
BCG MATRIX
INTERNAL POLICIES
SWOT Analysis
Strengths
Weaknesses
Opportunities
Threats
STRENGTHS
Online services of all its banking facilities
All branches of ICICI Bank well equipped with
advanced technology
Friendly staff
12 hrs services


WEAKNESSES
High Bank Service Charges
Less Credit Period


OPPORTUNITIES
Bank Insurance services
Increase in percentage of Returns on deposits
Recruit professionally guided students
Associate with social cause

THREATS
Competition
Security in Net Services
Decentralized Management
No proper facilities to uneducated customers


BCG MATRIX

WAY AHEAD