ICICI Bank, India’s largest
private sector bank by assets, has posted a 94 percent decline in
retail profits for the fiscal 12 month period to 31 March 2009:
INR580 million ($11.6 million) compared to INR9.47 billion for the
year-ago period. The bank has been hurt by slowing loan growth, a
rise in non-performing assets and a fall in retail
deposits.

Looking ahead to fiscal 2009-2010, the
Mumbai-based bank said it expects only moderate loan growth and
will focus on conserving capital and reducing risk.

In contrast, Bank of Baroda, Axis Bank and
Indian Bank all reported retail segment profits up by more than 50
percent for the year to 31 March, while at HDFC Bank, the country’s
second-largest private sector bank, retail profits soared by 135
percent to INR12.9 billion.

A number of outstanding fourth-quarter results
from the country’s public sector banks – notably Bank of Baroda and
Indian Bank, which reported net earnings up by 172 percent and 63
percent, respectively – has only served to heighten anticipation
about the sector’s largest player, State Bank of India (SBI). It
reports full-year earnings on 9 May.

SBI, which now has 11,101 branches (and says
it will add another 800-1,000 over the next 12 months), has been
aggressively taking retail banking market share in India. While
market indicators suggest its net interest margin will fall by at
least 15 basis points to around 3 percent for the year, analysts
still expect SBI’s results to show a sharp rise in retail
profits.

For ICICI, the fourth quarter was brutal. The
retail division posted a loss of INR4.33 billion, while at group
level the bank reported its biggest fall in net earnings in more
than six years, down 35 percent for the quarter to INR7.4 billion.
Provisions for loan defaults were up by 14 percent to INR10.8
billion.

ICICI’s results also highlighted a loss of
deposits market share. While HDFC, Axis and Bank of Baroda all
reported double digit retail deposit growth, ICICI posted a 1.7
percent decline for the year. As a consequence, Axis and HDFC
leapfrogged ICICI in terms of deposits, with INR680 billion and
INR634 billion respectively, compared with ICICI’s INR627
billion.

ICICI says its focus will be on low interest
current accounts and retail savings accounts (referred to as CASA)
to lessen its dependence on wholesale deposits.

“This will be our growth engine for profit,”
said the bank’s new CEO, Chanda Kochhar. “We have seen a healthy
growth in CASA coming back to us and the CASA ratio has improved,
from 27 percent on 31 December to end the [fiscal] year at 28.7
percent.”

Stressing the importance of CASA, she set an
ambitious target for fiscal 2009-2010 before the bank would
consider ramping up its retail lending. “My intention is we should
get to a CASA to total deposits ratio of at least 33 percent before
we start pressing the accelerator on lending because I think our
current ratios are lower than industry averages.”

Like all Indian banks, ICICI is expecting to
also benefit from rapid branch expansion. It is increasing its
current network of 1,438 units to around 2,000 by the end of March
2010.

Country snapshot

India – selected banking groups
ranked by FY2009 profit

 

Total group
pre-tax profit

Retail banking
profit(1)

Total assets

Retail deposits

FY09 (INRbn)

Y-o-y % change

FY09 (INRbn)

Y-o-y % change

FY09 (INRtrn)

Y-o-y % change

FY09 (INRbn)

Y-o-y % change

ICICI Bank

51.2

1.2

0.58

-93.9

3.79

-5.1

627

-1.7

Bank of Baroda

33.4

51.4

14.1

50.0

2.27

26.6

n/d

n/d

HDFC Bank

32.9

44.6

12.9

134.9

1.83

38

634

15.4

Axis Bank

27.8

69.2

2.02

54.9

1.47

35

680

33.1

Indian Bank

22.8

34.3

8.77

61.2

0.84

19.3

226

15.9

Central Bank of India

14.4

13.3

n/d

n/d

n/d

n/d

438

9.8

IDBI Bank

9.8

19.8

0.17

-92.1

1.7

32

n/d

n/d

n/d=not disclosed. (1) figures refer to
business units either wholly or primarily focused on consumer
financial services Source: RBI