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A STUDY ON FINANCIAL PERFORMANCE OF ICICI BANK

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CIKITUSI JOURNAL FOR MULTIDISCIPLINARY RESEARCH ISSN NO: 0975-6876

A STUDY ON FINANCIAL PERFORMANCE OF ICICI BANK

Dr. C. Balakrishnan M. Com., M. Phil., Ph. D.

Assistant Professor in Commerce

Sri Krishna Arts and Science College, Coimbatore

Abstract

ICICI become the first Indian company and the first bank or financial institution from non–Japan
Asia to be listed on the NYSE. This study is analytical in nature. The main purpose of this study is to
study the financial performance of ICICI bank using camel analysis. This study is analytical in
nature. Secondary Data is collected from annual reports, books, journals and periodicals. The
collected data has been analysed using ratio analysis. The study concludes that ICICI bank was in
an growing trend and liquidity parameter were on the top position.
Keywords: bank, growing, institution, financial, camel, analytical, liquidity, growing, trend, etc.,

INTRODUCTION

The banking sector has shown a remarkable responsiveness to the needs of the planned economy. It
has brought about a considerable progress in its efforts at deposit mobilization and has taken a
number of measures in the recent past for accelerating the rate of growth of deposits. The activities
of commercial banking have growth in multi-directional ways as well as multi-dimensional
manner.. In a way, commercial banks have emerged as key financial agencies for rapid economic
development. By pooling the savings together, banks can make available funds to specialized
institutions which finance different sectors of the economy, needing capital for various purposes,
risks and durations. By contributing to government securities, bonds and debentures of term –
lending institutions in the fields of agriculture, industries and now housing, banks are also providing
these institutions with an access to the common pool of savings mobilized by them, to that extent
relieving them of the responsibility of directly approaching the saver. This intermediation role of
banks is particularly important in the early stages of economic development and financial
specification. A country like India, with different regions at different stages of development,

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presents an interesting spectrum of the evolving role of banks, in the matter of inter-mediation and
beyond.

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 medium–term 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.

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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).

OBJECTIVES:

 To find out the Capital adequacy, Asset quality, Management efficiency, Earnings and
Liquidity of the ICICI bank.
 To analyse the financial performance of ICICI bank using CAMEL rating system.

SCOPE OF THE STUDY

 The study of financial performance helps to understand the overall profitability position,
liquidity position and long term financial performance of the ICICI banks.
 This study helps to evaluate ICICI bank and suggest to their investors.

LIMITATIONS OF THE STUDY:

 The study depends upon the secondary data collected i.e. various kinds of reports of the
ICICI bank.

 The period of study is limited to five years only

REVIEW OF LITERATURE

Baral (2005), study the performance of joint ventures banks in Nepal by applying the CAMEL
Model. The study was mainly based on secondary data drawn from the annual reports published by
joint venture banks. The report analyzed the financial health of joint ventures banks in the CAMEL
parameters. The findings of the study revealed that the financial health of joint ventures is more
effective than that of commercial banks. Moreover, the components of CAMEL showed that the
financial health of joint venture banks was not difficult to manage the possible impact to their
balance sheet on a large scale basis without any constraints inflicted to the financial health.

Wirnkar and Tanko (2008), analyzed the adequacy of CAMEL in evaluating the performance of
bank. This empirical research was implemented to find out the ampleness of CAMEL in examining

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the overall performance of bank, to find out the importance of each component in CAMEL and
finally to look out for best ratios that bank regulators can adopt in assessing the efficiency of banks.
The analysis was performed from a sample of eleven commercial banks operating in Nigeria. The
study covered data from annual reports over a period of nine years (1997-2005). The analysis
disclosed the inability of each component in CAMEL to congregate the full performance of a bank.
Moreover the best ratios in each CAMEL parameter were determined.

Bansal (2010) studied the impact of liberlization on productivity and profitability of public sector
banks in India. The study has been conducted on the basis of primary as well as secondary data for
the period 1996-07. The study concluded that the ability of banks to face competition was
dependent on their determined efforts at technological upgradation and improvement in operational
and managerial efficiency, improvement in customer service, internal control and augmenting
productivity and profitability. The study found that public sector banks have to pay great attention
to strategic management, strategic planning and to greater specialization in the technical aspect of
lending and credit evaluation. It was recommended that public sector banks should strengthen their
project appraisal capabilities. In order to raise their productivity and profitability, public sector
banks should spell turnover strategies, income-oriented and cost oriented strategies from time to
time.

RESEARCH METHODOLOGY

The nature of study of this project is analytical study. In analytical study, one has to use facts or
information already available and analyze these to make critical evaluation of the material.
Secondary data are those data which have already collected and stored. Secondary data may
collected from

 Annual reports of the banks

 Bulletins
 Periodicals
 News letters
 Internal reports of the bank

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TOOLS USED IN ANALYSIS

CAMEL FRAMEWORK
PERIOD OF STUDY
The study covers the four years period from 2014 to 2018
ANALYSIS AND INTERPRETATION

CAMEL ANALYSIS
Table No.1
CAPITAL ADEQUACY RATIOS
Ratios
2018 2017 2016 2015 2014
Capital Adequacy Ratios
17.02 17.70 18.74 18.52 19.54
Debt Equity Ratio
4.50 4.53 4.39 4.23 4.10
Advances to asset ratio
59.97 56.96 54.07 53.57 53.26
Government Securities to total
investments 57.56 54.17 54.28 54.77 48.27

From the above table, it is found that ICICI Capital adequacy ratio was highest in the year 2016,
Debt equity ratio was highest in the year 2017, Advance to asset ratio was highest in the year 2018
and Government Securities to total investments was highest in the year 2018
Table No.2
ASSETS QUALITY RATIOS

Ratios
2018 2017 2016 2015 2014
Net NPA to total advances ratio
1.61 0.97 0.77 0.73 1.11
Total investments to total assets ratio
28.87 29.76 31.92 33.68 33.15
Net NPA to total assets ratio
0.99 0.55 0.41 0.39 0.59

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From the above table, it is found that ICICI Net NPA to total advances ratio was highest in the year
2018, Total investments to total assets ratio was highest in the year 2015 and Net NPA to total
assets ratio was highest in the year 2018.

Table No.3
MANAGEMENT EFFICIENCY RATIOS
Ratios
2018 2017 2016 2015 2014
Total advances to total deposits
ratio 107.18 102.04 99.19 99.31 95.90

Business per employee

112938140.26 92849708.72 9391171 87382046. 77580440
5.27 47 .08
Profits per employee
1684887.74 1358302.69 1341411. 1109420.2 904241.9
86 1 9
Return on equity ratio
14.3 13.7 12.9 11.1 9.6

From the above table, it is found that ICICI Total advances to total deposits ratio was highest in the
year 2018, Business per employee was highest in the year 2015, Profits per employee was highest
in the year 2018 and Return on equity ratio was highest in the year 2018.
Table No.4
EARNING QUALITY
Ratios
2018 2017 2016 2015 2014
Operating profit to total asset ratio
3.05 2.79 2.45 2.19 2.23
Net profit to total asset ratio
1.73 1.65 1.55 1.36 1.27
Interest income to total income ratio
80.13 80.90 82.76 81.72 79.62
Net interest margin to total asset ratio
3.48 3.33 3.11 2.73 2.64
From the above table, it is found that ICICI Operating profit to total asset ratio was highest in the
year 2018, Net profit to total asset ratio was highest in the year 2018, Interest income to total
income ratio was highest in the year 2016 and Net interest margin to total asset ratio
was highest in the year 2018.

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Table No.5
LIQUIDITY RATIOS
Ratios
2018 2017 2016 2015 2014
Liquid asset to total asset ratio
6.55 6.98 7.71 7.65 8.39
Liquid asset to total deposit ratio
11.70 12.51 14.15 14.18 15.11
Liquid asset to demand deposit
ratio 85.43 96.03 112.16 103.59 98.02

Government securities to total asset

ratio 16.62 16.12 17.33 18.45 16.00
From the above table, it is found that ICICI Liquid asset to total asset ratio was highest in the year
2016, Liquid asset to total deposit ratio was highest in the year 2016, Liquid asset to demand
deposit ratio was highest in the year 2016 and Government securities to total asset ratio was
highest in the year 2015.

CONCLUSION:

The overall financial performance of ICICI banks in India for the period of 2014-2018. It is found
that under the capital adequacy ratio parameter bank was at the average, asset quality parameter
ICICI bank was moderate, management efficiency parameter ICICI bank was in an increasing trend,
earning quality parameter the ICICI bank was in an growing trend and liquidity parameter ICICI
bank were on the top position.

References:
 Baral (2005), “A Case Study of Joint Venture Banks in Nepal” The Journal of
Nepalese Business Studies , Vol. II - No. 1
 Bodla, B. S. and Verma, R. (2006). Evaluating Performance of Banks through
CAMEL Model: A Case Study of SBI and ICICI. The ICFAI Journal of Bank
Management, 5(3), pp.49-63.
 Gupta and Kaur (2008). “An Analysis of Indian Public Sector Banks Using Camel
Approach” Journal of Business and Management. Vol 16

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CIKITUSI JOURNAL FOR MULTIDISCIPLINARY RESEARCH ISSN NO: 0975-6876

 Wirnkar & Tanko (2008), CAMELS and Banks Performance Evaluation: The Way
Forward. Working Paper Series. Social Science Research Network.
 Dash and Das (2009), A CAMELS Analysis of the Indian Banking Industry, Social
Science Research Network
 Kaur, H.V. (2010), Analysis of Banks in India- A CAMEL Approach, Global
Business Review, 11, pp.257-280.
 Sangmi, M. and Nazir, T. (2010), Analysing financial performance of commercial
banks in India ,Application of CAMEL model, Pakistan Journal of Commerce and
Social Science, 4(1), pp.40-55
 Prasad and Ravinder, G. (2011), “Performance Evaluation of Banks: A Comparative
Study on SBI, PNB, ICICI and HDFC”, Advances in Management, Vol. 4(2)
September, pp. 43-53.
 Uppal R.K. (2010). „Emerging Issues and Strategies to Enhance M-Banking
Services‟. African Journal of Marketing. 2(2). February. 029-036.
 Goyal and Kaur (2008), “Performance of New Private Sector Banks in India”, The
Indian Journal of Commerce, Vol. 61, No. 3, July-September, pp.1-11
 Arora and Kaur (2008), “Diversification in Banking Sector in India: Determinants of
Financial Performance”, The Indian Journal of Commerce, Vol. 61, No. 3
 Bansal, D. (2010), “impact of Liberlisation on productivity and Profitability of
Public Sector Banks in India”, A Ph.D. Thesis submitted to Saurashtra University,
Rajkot.
 Shukla P. (2009), A Study of Recent Trends in Indian Banking System and its
Impact on Cost and Profitability of Commercial Banks, A Ph.D. thesis submitted to
C.S. J. M. University, Kanpur, 2009.

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