Bank The merger: October 25, 2001 Agenda for the new millennium
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Bank
The merger:
October 25, 2001
Agenda for the new millennium
2
Content
The merger
Transformation in the financial sector
ICICI group today - a virtual universal bank
Rationale for merger
Merger process
Conclusion
Summary of half yearly performance
ICICI
ICICI Bank
3
Technology
Transformation in the financial sector
… are bringing about a fundamental change in financial
sector business models
Globalization Liberalization
4
Emergence of integrated
universal banks
Demanding
and
sophisticated
customers
Globalization
Technological
innovation
Shareholder
returns
Change in business models
… as evidenced by the international precedents in
universal banking
5
Universal Banks
… many international players have realized the benefits
of universal banking
6
… all leading to the development of a more robust
financial system
The benefits
Economies of scale through volumes in
Operating costs
Technology deployment
Economies of scope
Large product suite
Cross-selling potential
Optimization of Human capital
Optimization of Financial capital
7
ICICI has harnessed some of the above
benefits by transforming itself into a virtual
universal bank over the last five years
8
ICICI group today - a virtual universal
bank
Retail Financial Services Corporate Financial ServicesInternet
•B2B
•Consumer
Finance Portals
•Web Trade
•Venture Capital
ICICI
ICICI Bank
ICICI Securities
ICICI Brokerage
ICICI Venture
ICICI Infotech
ICICI Lombard
ICICI
ICICI Bank
ICICI Capital
ICICI Prudential
ICICI Web Trade
ICICI PFS
ICICI Home
Technology Platforms
•Payment Gateway
•Customer Relationship
Management
•Financial Vertical
•Web Technologies
… based on key building blocks present across the
group
9
IC
IC
I g
ro
up’s
strateg
y fo
r su
ccess Building blocks
Human Capital
Speed Capital
Brand Identity
Organizational Values
Knowledge Capital
Technology Capital
The building
blocks
supplemented
by
organizational
changes have
created the
right
combination
for achieving
leadership
10
With these building blocks ICICI has built its
Strong brand identity
Technology enabled delivery channels
Largest network of ATMs in India
Highest number of Internet banking
registrations
Large product suite
Largest auto financier
Largest incremental issuer of cards
Credit cards, debit cards and ATM cards
Amongst the first banks in India to
commence lead generation for Insurance
products
ICICI’s leadership
11
Current operating environment
Blurring of boundaries amongst financial
intermediaries
Increasing competitive pressures
Universal banking provides competitive
advantages in the current environment
through
Large product suite
Diversified resource base
Economies of scale and scope
Optimization of Human and Financial capitals
… providing a strong business logic for merger of ICICI
and ICICI Bank
12
… having similar operating architecture, people and
processes. This merged entity is consequently well-
positioned to harness synergistic advantages and
thereby provide benefits to both ICICI and ICICI Bank
Strong complementary organizations
ICICI
•Large capital base
•Diversified and de-risked assets
•Strong brand
•Well established corporate
relationships
ICICI Bank
•Largest private sector bank
•Strong retail franchise
•Technology leader among banks
13
Benefits of merger
“Forward leap” in the hierarchy of Indian banks
A discontinuous jump in size and scale
Achieve size and scale of operations
Leverage ICICI’s capital and client base to increase
fee income
Higher profitability by leveraging on technology
and low cost structure
Offer a complete product suite with immense
cross-selling opportunities
ICICI’s presence in retail finance, insurance,
investment banking and venture capital
Access to the ICICI group’s talent pool
Bank
14
Benefits of merger
Improved ability to further diversify asset portfolio
and business revenues
Lower funding costs
Ability to accept/ offer checking accounts
Availability of float money due to active participation in
the payments system
Diversified fund raising due to access to retail funds
Increased fee income opportunities
Ability to offer all banking products
Bank
Merged entity would have key competitive advantages
and would be a more efficient provider of capital
15
Competitive advantages of the merged
entity
…after the merger, the combined entity would be the
second-largest bank in India, with an asset base of
over Rs. 1 trillion
Large capital
base
Extensive
customer
relationships &
strong brand
franchise
Complete
product
suite
Technology
-enabled
distribution
architecture
Low operating
costs
Vast
talent
pool
16
Merger process - highlights
Valuation
Independently appointed investment bankers
ICICI - JM Morgan Stanley
ICICI Bank - DSP Merrill Lynch
Jointly appointed independent accountant to
recommend the final exchange ratio
Deloitte, Haskins & Sells appointed
Recommended one share of ICICI Bank for two
shares of ICICI, which was approved by the
respective Boards
17
Merger process - highlights (contd.)
Transfer of ICICI’s shareholding in ICICI Bank
to an SPV prior to the merger
Divestment in FY2003 by way of appropriate
placement
Consolidation of retail operations
Merger of ICICI PFS and ICICI Capital Services
with ICICI Bank
18
Merger process - regulatory issues
Merger effective on
March 31, 2002 or the date of RBI approval,
whichever is later
Shareholders’ approval
High court approval
Accounting for the merger in line with
international best practices
Purchase method, mandatory under US
GAAP, to be adopted under Indian GAAP as
well
19
In conclusion
The merger will create a strong entity, which
will redefine banking in the highly competitive
era of globalization and liberalization
Bank
Summary of half yearly performance
21
ICICI: Summary performance (Indian
GAAP)
Q 2
F Y 0 1
Q 2
F Y 0 2
In c .
(% )
H 1
F Y 0 1
H 1
F Y 0 2
In c .
(% )
F Y 0 1
P ro fit b e fo re ta x 2 .7 7 3 .5 6 2 8 .5 5 .9 0 7 .4 2 2 5 .6 1 3 .9 1(1 )
P ro fit a fte r ta x 2 .5 4 2 .8 2 1 1 .0 5 .4 1 6 .0 8 1 2 .2 1 3 .5 1(1 & 2 )
T o ta l a s s e ts 6 8 4 .1 9 7 4 3 .7 1 8 .7 6 8 4 .1 9 7 4 3 .7 1 8 .7 7 3 4 .1 4
N e t N P A (% ) 7 .3 5 .2 - 7 .3 5 .2 - 5 .1
(Rs. in billion)
(1) After adding back accelerated provisions of Rs. 8.13 billion.
(2) Provision for tax for H1-FY02 has been made as per the new accounting standard on deferred taxation.
Profit to equity holders increased by 16% in H1-FY02 (net of
preference dividend payout)
22
ICICI: Summary ratios (Indian GAAP)
H 1(1 )
F Y 0 1
H 1(1 )
F Y 0 2
F Y 0 1(2 )
E P S (R s .) 1 3 .6 1 5 .5 1 7 .0
R e tu rn o n a s s e ts (% ) 1 .8 1 .8 2 .1
R e tu rn o n n e t w o r th (% ) 1 3 .5 1 4 .7 1 6 .4
O v e rh e a d s / N e t in c o m e fro m
o p e ra t io n s(3 )
(% ) 1 8 .5 1 4 .2 1 7 .4
O v e rh e a d s / A v e ra g e n e t a s s e ts (% ) 0 .6 0 .5 0 .5
(1) Annualized
(2) After adding back accelerated provisions and write-offs of Rs. 8.13 billion
(3) Net income from operations includes net fund-based income, fees & commissions and dividend income
23
ICICI: Consolidated profits (Indian
GAAP)
H 1
F Y 0 1
H 1
F Y 0 2
P ro fit a fte r ta x o f IC IC I 5 .4 1 6 .0 8
IC IC I’s s h a re o f in c o m e fro m
s u b s id ia r ie s /a ff i l ia te s 0 .6 7 1 .2 1
D iv id e n d e lim in a t io n (0 .3 6 ) (0 .3 8 )
C o n s o lid a te d p ro fit 5 .7 2 6 .9 1
21% increase in Indian GAAP consolidated profits
(Rs. in billion)
24
H 1
F Y 0 1
H 1
F Y 0 2
In c o m e b e fo re ta x 5 .3 3 5 .3 8
N e t In c o m e , a fte r c u m u la t iv e e ffe c t o f
a c c o u n t in g c h a n g e 4 .5 0 5 .0 1(1 )
T o ta l s to c k h o ld e r ’s e q u ity 7 3 .6 8 7 6 .9 1
T o ta l a s s e ts 6 8 5 .3 2 7 5 5 .8 8
ICICI: Consolidated profits (US GAAP)
(1) Net income, includes the cumulative effect of accounting change of Rs. 0.89 billion in
H1-FY02.
(Rs. in billion)
25
ICICI Bank: Summary performance
(Indian GAAP)
Q 2
F Y 0 1
Q 2
F Y 0 2
In c .
(% )
H 1
F Y 0 1
H 1
F Y 0 2
In c .
(% )
F Y 0 1
O p e ra tin g
p ro fit
5 8 5 .0 9 7 0 .0 6 6 .0 1 2 0 4 .0 2 3 5 6 .0 9 6 .0 2 9 0 2 .0
N e t p ro fit 3 0 1 .0 6 6 2 .0 1 2 0 .0 7 0 2 .0 1 3 1 4 .0 8 7 .0 1 6 1 1 .0
D e p o s its 9 7 2 8 3 .0 1 7 5 1 5 3 .0 8 0 .0 9 7 2 8 3 .0 1 7 5 1 5 3 .0 8 0 .0 1 6 3 7 8 2 .0
C u s to m e r
a s s e ts
6 3 2 4 2 .0 1 1 4 0 9 2 .0 8 0 .0 6 3 2 4 2 .0 1 1 4 0 9 2 .0 8 0 .0 1 0 7 5 6 0 .0
N e t N P A 8 4 5 .0 1 6 1 2 .0 9 1 .0 8 4 5 .0 1 6 1 2 .0 9 1 .0 1 5 4 4 .0
(Rs. in million)
26
ICICI Bank: Summary ratios (Indian
GAAP)
H 1
F Y 0 1
H 1
F Y 0 2
F Y 0 1
E P S (R s )(1 )
7 .1 3 1 1 .9 3 8 .1 3
R e tu rn o n a s s e ts (% )(1 )
1 .2 9 1 .3 7 1 .3 4
R e tu rn o n n e t w o r th ( % )(1 )
1 1 .8 5 1 9 .0 7 1 2 .9 8
M a rk e t s h a re in d e p o s its (% ) 0 .9 7 1 .5 2 1 .4 4
M a rk e t s h a re in c u s to m e r
a s s e ts (% )
1 .2 6 2 .0 1 1 .9 2
C o s t to in c o m e (% ) 5 1 .2 5 4 .1 5 3 .5
C a p ita l a d e q u a c y (% ) 1 7 .5 9 1 3 .0 0 1 1 .5 7
(1) Annualized
27
ICICI Bank: Income statement (US
GAAP)
H 1
F Y 0 1
H 1
F Y 0 2
N e t in te re s t in c o m e (a fte r
p ro v is io n fo r c re d it lo s s e s ) 1 5 0 5 .0 2 1 5 2 .0
N o n - in te re s t re v e n u e 3 6 7 .0 2 2 3 1 .0
N o n - in te re s t e x p e n s e 1 2 2 2 .0 2 7 9 2 .0
In c o m e b e fo re ta x 6 5 0 .0 1 5 9 1 .0
T a x 4 3 .0 4 5 6 .0
N e t in c o m e 6 0 7 .0 1 1 3 5 .0
(Rs. in million)
28
Safe Harbor
ICICI Limited and ICICI Bank expect to make available Notice of the Shareholders’
Meeting, a copy of the Scheme of Amalgamation and an Information Statement
to shareholders of ICICI Limited and ICICI Bank and the investors in each
company’s ADSs. These documents contain important information about the
merger. Shareholders and investors in the ADSs are urged to read these
documents carefully when they are available. Free copies of these documents
may also be obtained from ICICI Limited and ICICI Bank.
ICICI Limited‘s and ICICI Bank’s filings with the Securities and Exchange
Commission are also available to the public from commercial document-retrieval
services or from the website maintained by the SEC at www.sec.gov.
29
Safe Harbor
This presentation contains forward-looking statements based on the current
beliefs and expectations of ICICI Limited’s and ICICI Bank’s management and are
subject to significant risks and uncertainties. Forward-looking statements include
the information concerning possible or assumed future results of operations.
Actual results may differ from those set forth in the forward-looking statements.
These uncertainties include: the ability to obtain governmental and other
approvals of the merger on the proposed terms and schedule; the failure of ICICI
Limited and ICICI Bank shareholders to approve the merger or the failure of the
High Courts of Mumbai and Gujarat to approve the Scheme of Amalgamation;
the impact of the regulations applicable to banks under Indian law to which the
business being conducted by ICICI would for the first time become subject
consequent to the merger; the risk that the businesses will not be integrated as
swiftly as planned; the risk that the revenue synergies and cost savings from the
merger may not be fully realized or may take longer to realize than expected;
disruption of the merger making it more difficult to maintain relationships with
clients, employees or suppliers; the effect of economic conditions and interest
rates on a national, regional or international basis and market volatility in the
securities markets or foreign exchange rates or indices; the risk of new and
changing regulation in India and internationally; competitive pressures in the
financial services industries; and unfavourable political or other developments in
Indian or international markets.
30
Safe Harbor
These uncertainties may have an adverse effect on the results of our
operations, financial condition, liquidity and the price of our equity
shares and our ADSs. Additional factors that could cause ICICI
Limited’s and ICICI Bank’s results to differ materially from those
described in the forward-looking statements can be found in the 2001
Annual Reports on Form 20-F of ICICI Limited and ICICI Bank, filed with
the SEC and will be contained in the Information Statement.
31
Thank You
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