ICICI Bank sticks to the basics
The country’s second-largest bank ICICI Bank will stay focused on its strategy of four Cs - capital conservation, CASA improvement, cost control, and credit monitoring – during 2009-10 as it consolidates its loan book to reduce dependence on corporate deposits, reports Rajendra Palande.india Updated: May 13, 2009 22:09 IST
The country’s second-largest bank ICICI Bank will stay focused on its strategy of four Cs - capital conservation, current account and saving account (CASA) improvement, cost control, and credit monitoring – during 2009-10 as it consolidates its loan book to reduce dependence on corporate deposits. CASA is the current account and savings account balances, which are very low cost funds that bring down the average cost of funds for banks.
Corporate deposits, generally considered volatile as opposed to retail deposits, accounted for 52 per cent of the bank's total deposits of Rs 2,18,348 crore at the end of March 2009, though down from 55 per cent last year.
The bank, which pioneered mass retail banking at the beginning of this decade to become the largest retail lender, had paused to position itself for the next phase of growth. The bank maintained high levels of liquidity in its domestic businesses as well as in overseas subsidiaries during 2008-09.
ICICI Bank plans to continue to maintain a high capital adequacy ratio, rebalance the funding mix by increasing the share of retail deposits and indulge only in selective lending, which had resulted in its loan book shrinking by 3.2 per cent in 2008-09 (8.4 per cent excluding the impact of exchange rates). The bank’s capital adequacy ratio at the end of March 2009 was 15.5 per cent against the minimum required 9 per cent.
“We should at least get to about 33 per cent of CASA ratio (from 28.7 per cent at the end of March 2009) before we start pressing the accelerator on lending,” said Chanda Kochhar, managing director and CEO, ICICI Bank.
The bank’s focus on capital, liquidity and risk containment had a positive impact on its financial performance in 2008-09. In 2008-09, the bank saw a 15 per cent increase in net interest income at Rs 8,367 crore in, increase in net interest margin to 2.4 per cent from 2.2 per cent a year earlier.
In the fourth quarter, the bank saw a healthy increase in deposits. Total deposits increased by Rs 9,200 crore, of which Rs 5,286 crore were CASA deposits. This means CASA ratio went up 130 basis points (100 basis points is 1 percentage point) to 28.7 per cent.
“If you look at the balance sheet strategy, even in the last 12 months, wholesale deposits have declined. So that kind of a strategy will continue,” Kochhar told analysts at a recent analyst conference.