United States
Securities and Exchange Commission
Washington, D.C. 20549
FORM 6-K
Report of Foreign Issuer
Pursuant to Rule 13a-16 or 15d-16 under
the Securities Exchange Act of 1934
For the month of May 2002
ICICI Bank Limited
(Translation of registrant's name into English)
4th floor, South Tower
ICICI Towers,
Bandra-Kurla Complex
Mumbai, India 400 051
(Address of principal executive office)
Indicate by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
--- ---
Indicate by check mark whether the registrant by furnishing the information con-
tained in this Form is also thereby furnishing the information to the Commision
Commission pursuant to Rule 12g 3-2(b) under the Securities Exchange Act of
1934.
Yes No. X
--- ---
If "Yes" is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g 3-2(b).
Not applicable.
INDEX TO EXHIBITS
Item
----
Item 1. Financial statements prepared in accordance with US GAAP
for the years ended March 31, 2000, 2001 and 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Dated: May 16, 2002
ICICI Bank Limited
By: /s/ Nilesh Trivedi
-----------------------------------
Name: Nilesh Trivedi
Title: Assistant Company Secretary
ICICI Bank Limited
Financial statements
Prepared in accordance with US GAAP
for the years ended March 31, 2000, 2001 and 2002
ICICI Bank Limited
Financial statements
for the years ended March 31, 2000, 2001 and 2002
Contents Page
Independent Auditors' Report 3
Balance Sheets as at March 31, 2001 and 2002 4
Statements of Income for the years ended March 31, 2000, 2001 and 2002 5
Statements of Changes in Stockholders' Equity and Other Comprehensive
Income for the years ended March 31, 2000, 2001 and 2002 6
Statements of Cash Flows for the years ended March 31, 2000, 2001
and 2002 7 - 8
Notes to Financial Statements 9 - 41
INDEPENDENT AUDITORS' REPORT
To the board of directors and stockholders of ICICI Bank Limited
We have audited the accompanying balance sheets of ICICI Bank Limited as of
March 31, 2002 and 2001 and the related statements of income, changes in
stockholders' equity and other comprehensive income and cash flows for each of
the years in the three-year period ended March 31, 2002. These financial
statements are the responsibility of the Bank's management. Our responsibility
is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of ICICI Bank Limited as of March
31, 2002 and 2001, and the results of its operations and its cash flows for
each of the years in the three-year period ended March 31, 2002, in conformity
with accounting principles generally accepted in the United States.
As discussed in note 1.20.1 to the financial statements, on April 1, 2001 the
Bank adopted the provisions of Statement of Financial Accounting Standard No.
133 "Accounting for Derivative Instruments and Hedging Activities", as amended.
The United States dollar amounts are presented in the accompanying financial
statements solely for the convenience of the readers and have been translated
to United States dollars on the basis disclosed in note 1.4.1.
KPMG
Mumbai, India
May 2, 2002
3
ICICI Bank Limited
Balance sheets
In millions, except share data
Convenience
translation
into US$
At March 31, At March 31, At March 31,
------------ ------------ ------------
2001 2002 2002(1)
------------ ------------ ------------
(unaudited)
--------------------------------------------
Rs Rs US$
Assets
Cash and cash equivalents ........................................................... 44,896 87,965 1,801
Interest-bearing deposits with banks ................................................ 2,410 1,406 29
Amounts lent under reverse repurchase transactions .................................. - 9,116 187
Trading assets ...................................................................... 18,725 26,075 534
Securities:
Available for sale ................................................................ 24,787 155,758 3,190
Held to maturity (fair value Rs 11,524 million and
Rs 28,768 million at March 31, 2001 and 2002
respectively) ................................................................... 10,944 24,294 498
Loans (net of allowance for loan losses and unearned income) ........................ 93,030 72,474 1,484
Customers' liability on acceptances ................................................. 12,869 12,608 258
Property and equipment, net ......................................................... 3,920 4,831 99
Intangible assets ................................................................... 2,641 2,397 49
Other assets ........................................................................ 6,316 7,881 161
---------- ---------- ----------
Total assets ........................................................................ 220,538 404,805 8,290
========== ========== ==========
Liabilities
Interest bearing deposits ........................................................... 137,883 295,647 6,054
Non-interest bearing deposits ....................................................... 26,371 29,574 606
---------- ---------- ----------
Total deposits ...................................................................... 164,254 325,221 6,660
Amounts borrowed under repurchase transactions ...................................... 537 21,399 438
Trading liabilities ................................................................. 5,958 1,237 25
Short-term borrowings ............................................................... 3,012 1,409 29
Bank acceptances outstanding ........................................................ 12,869 12,608 258
Other liabilities ................................................................... 15,180 19,041 390
Long-term debt ...................................................................... 2,421 5,740 118
---------- ---------- ----------
Total liabilities ................................................................... 204,231 386,655 7,918
---------- ---------- ----------
Commitments and contingencies (Note 20)
Stockholders' equity:
Common stock (Rs 10 par value, Authorized shares: 300 million
Issued shares March 31, 2001: 220,358,680 shares and
March 31, 2002: 220,358,680 shares) ............................................... 2,203 2,203 45
Additional paid-in capital .......................................................... 10,927 10,926 224
Retained earnings ................................................................... 2,974 4,040 83
Deferred compensation ............................................................... (20) (5) -
Accumulated other comprehensive income .............................................. 223 986 20
---------- ---------- ----------
Total stockholders' equity .......................................................... 16,307 18,150 372
---------- ---------- ----------
Total liabilities and stockholders' equity .......................................... 220,538 404,805 8,290
========== ========== ==========
See accompanying notes to financial statements.
(1) Exchange Rate: Rs 48.83 = US$ 1.00 at March 30, 2002
4
ICICI Bank Limited
Statements of income
In millions, except share data
Convenience
translation
into US$
Year ended
Years ended March 31, March 31,
---------------------------------- ---------
2000 2001 2002 2002 (1)
-------- -------- -------- --------
(unaudited)
Rs Rs Rs US$
Interest and dividend income
Interest and fees on loans ..................................................... 4,437 7,419 10,327 211
Interest and dividends on securities, available for sale ....................... 684 1,217 3,709 76
Interest and dividends on securities held to maturity .......................... - 543 2,006 41
Interest and dividends on trading assets ....................................... 3,073 2,833 3,965 81
Interest on deposits with banks ................................................ 233 298 467 10
Other interest income .......................................................... 7 96 363 7
-------- -------- -------- --------
Total interest and dividend income ............................................. 8,434 12,406 20,837 426
-------- -------- -------- --------
Interest expense
Interest on deposits ........................................................... 5,789 7,261 13,582 278
Interest on long term debt ..................................................... 244 240 505 10
Interest on trading liabilities ................................................ 542 784 723 15
Other interest expense ......................................................... 81 123 306 6
-------- -------- -------- --------
Total interest expense ......................................................... 6,656 8,408 15,116 309
-------- -------- -------- --------
Net interest income ............................................................ 1,778 3,998 5,721 117
Provision for loan losses ...................................................... (427) (1,082) (1,722) (35)
-------- -------- -------- --------
Net interest income after provision for loan losses ............................ 1,351 2,916 3,999 82
-------- -------- -------- --------
Non-interest income
Fees and commissions ........................................................... 607 1,125 1,733 36
Net gain on trading activities ................................................. 857 602 2,196 45
Net gain/(loss) on sales of available for sale securities ...................... 75 (384) 872 18
Foreign exchange income ........................................................ 220 397 365 7
Other revenue .................................................................. - 14 47 1
-------- -------- -------- --------
Total non-interest income ...................................................... 1,759 1,754 5,213 107
-------- -------- -------- --------
Non-interest expense
Salaries and employee benefits ................................................. 316 507 1,518 31
Occupancy and equipment ........................................................ 520 1,171 2,166 44
Advertising and publicity ...................................................... 39 143 80 2
Administration and other expense ............................................... 454 1,271 2,252 46
Amortization of goodwill and other intangible assets ........................... - 12 244 5
-------- -------- -------- --------
Total non-interest expense ..................................................... 1,329 3,104 6,260 128
-------- -------- -------- --------
Income before income taxes ..................................................... 1,781 1,566 2,952 61
Income tax expense ............................................................. 379 258 931 19
-------- -------- -------- --------
Income before cumulative effect of accounting changes .......................... 1,402 1,308 2,021 42
Cumulative effect of accounting changes (net of tax of Rs. 9 million) ......... - - 16 -
-------- -------- -------- --------
Net income ..................................................................... 1,402 1,308 2,037 42
-------- -------- -------- --------
Basic earnings per share
Income before cumulative effect of accounting changes ....................... 8.49 6.60 9.17 0.19
Cumulative effect of accounting changes, net of tax ......................... - - 0.07 -
-------- -------- -------- --------
Net income ..................................................................... 8.49 6.60 9.24 0.19
Weighted average number of common shares (in millions) ...................... 165.09 198.24 220.36 220.36
Diluted earnings per share
Income before cumulative effect of accounting changes ....................... 8.49 6.60 9.17 0.19
Cumulative effect of accounting changes, net of tax ......................... - - 0.07 -
-------- -------- -------- --------
Net income ..................................................................... 8.49 6.60 9.24 0.19
Weighted average number of common shares (in millions) ...................... 165.11 198.24 220.36 220.36
See accompanying notes to financial statements.
(1) Exchange Rate: Rs 48.83 = US$ 1.00 at March 30, 2002
5
ICICI Bank Limited
Statements of changes in stockholders' equity and other comprehensive income
for the years ended March 31, 2000, 2001 and 2002
In millions except share data
Common stock Additional
----------------------- Paid-In Retained Deferred
Shares Amount Capital Earnings Compensation
--------- --------- ---------- ----------- ------------
Balance as of March 31, 1999 ................................ 165,000,700 1,650 375 756 -
-----------------------------------------------------------------------------------------------------------------------------------
Common stock issued ......................................... 31,818,180 318 7,020 - -
Compensation related to employee stock option plan .......... - - 40 - (40)
Amortization of deferred compensation ....................... - - - - 1
Comprehensive income
Net income ................................................ - - - 1,402 -
Unrealized gain on securities, (net of tax Rs 15 million) . - - - - -
Comprehensive income ...................................... - - - - -
Dividend paid (Rs 1.2 per common share) ..................... - - - (218) -
-----------------------------------------------------------------------------------------------------------------------------------
Balance as of March 31, 2000 ................................ 196,818,880 1,968 7,435 1,940 (39)
-----------------------------------------------------------------------------------------------------------------------------------
Common stock issued ......................................... 23,539,800 235 3,502 - -
Compensation related to employee stock option plan .......... - - (10) - 10
Amortization of deferred compensation ....................... - - - - 9
Comprehensive income
Net income ................................................ - - - 1,308 -
Unrealized gain on securities, (net of tax Rs 91 million) . - - - - -
Comprehensive income ...................................... - - - - -
Dividend paid (Rs 1.5 per common share) ..................... - - - (274) -
-----------------------------------------------------------------------------------------------------------------------------------
Balance as of March 31, 2001 ................................ 220,358,680 2,203 10,927 2,974 (20)
-----------------------------------------------------------------------------------------------------------------------------------
Compensation related to employee stock option plan .......... - - (1) - 1
Amortization of deferred compensation ....................... - - - - 14
Comprehensive income
Net income ................................................ - - - 2,037 -
Unrealized gain on securities, (net of tax Rs 466 million) - - - - -
Comprehensive income ...................................... - - - - -
Dividend paid (Rs 4.0 per common share) ..................... - - - (971) -
-----------------------------------------------------------------------------------------------------------------------------------
Balance as of March 31, 2002 ................................ 220,358,680 2,203 10,926 4,040 (5)
-----------------------------------------------------------------------------------------------------------------------------------
Balance as of March 31,2002 ................................. 45 224 83 -
(US $ (1)) (unaudited)
-----------------------------------------------------------------------------------------------------------------------------------
Accumulated
Other
Comprehensive Total
Income, net Stockholders'
of tax Equity
------------ ------------
Balance as of March 31, 1999 ................................ 49 2,830
--------------------------------------------------------------------------------------------
Common stock issued ......................................... - 7,338
Compensation related to employee stock option plan .......... - -
Amortization of deferred compensation ....................... - 1
Comprehensive income
Net income ................................................ - 1,402
Unrealized gain on securities, (net of tax Rs 15 million) . 34 34
-----------
Comprehensive income ...................................... - 1,436
Dividend paid (Rs 1.2 per common share) ..................... - (218)
--------------------------------------------------------------------------------------------
Balance as of March 31, 2000 ................................ 83 11,387
--------------------------------------------------------------------------------------------
Common stock issued ......................................... - 3,737
Compensation related to employee stock option plan .......... - -
Amortization of deferred compensation ....................... - 9
Comprehensive income
Net income ................................................ - 1,308
Unrealized gain on securities, (net of tax Rs 91 million) . 140 140
-----------
Comprehensive income ...................................... - 1,448
Dividend paid (Rs 1.5 per common share) ..................... - (274)
--------------------------------------------------------------------------------------------
Balance as of March 31, 2001 ................................ 223 16,307
--------------------------------------------------------------------------------------------
Compensation related to employee stock option plan .......... - -
Amortization of deferred compensation ....................... - 14
Comprehensive income
Net income ................................................ - 2,037
Unrealized gain on securities, (net of tax Rs 466 million) 763 763
-----------
Comprehensive income ...................................... - 2,800
Dividend paid (Rs 4.0 per common share) ..................... - (971)
--------------------------------------------------------------------------------------------
Balance as of March 31, 2002 ................................ 986 18,150
--------------------------------------------------------------------------------------------
Balance as of March 31,2002 ................................. 20 372
(US $ (1)) (unaudited)
--------------------------------------------------------------------------------------------
See accompanying notes to financial statements.
(1) Exchange Rate: Rs 48.83 = US$ 1.00 at March 30, 2002
6
ICICI Bank Limited
Statements of cash flows
In millions except share data
Convenience
translation
into US$
Year ended
Years ended March 31, March 31,
------------------------------------- ---------
2000 2001 2002 2002(1)
--------- --------- --------- ---------
(unaudited)
---------------------------------------------------
Rs Rs Rs US$
Operating activities
Net income ................................................................. 1,402 1,308 2,037 42
Adjustments to reconcile net income to net cash (used in) /
provided by operating activities:
Provision for loan losses .................................................. 427 1,082 1,722 35
Depreciation ............................................................... 201 352 636 13
Amortization ............................................................... 173 253 1,032 21
Loss on sale of property and equipment ..................................... 1 2 1 -
Deferred income expense/(benefit) .......................................... 113 (442) (240) (5)
Realized (gain) / loss on sales of available for sale
securities, net .......................................................... (75) 384 (872) (18)
Net change in:
Trading assets ......................................................... (12,509) (6,091) (7,413) (152)
Other assets ........................................................... (1,608) (120) (1,745) (36)
Other liabilities ...................................................... 1,661 7,490 3,418 71
Trading liabilities .................................................... 1,503 4,048 (4,720) (96)
--------- --------- --------- ---------
Net cash (used in) / provided by operating activities ...................... (8,711) 8,266 (6,144) (125)
--------- --------- --------- ---------
Investing activities
Changes in interest bearing deposits with banks ............................ (2,048) 1,129 1,004 21
Activity in held to maturity securities
Purchases .............................................................. - (1,174) (13,466) (276)
Activity in available for sale securities
Purchases .............................................................. (10,714) (15,050) (145,141) (2,972)
Sales .................................................................. 10,020 11,517 15,955 327
Loan originations and principal collections, net ........................... (19,843) (29,288) 18,951 388
Purchases of property and equipment ........................................ (528) (1,153) (1,556) (32)
Sales of property and equipment ............................................ 2 1 9 -
Amounts lent under reverse repurchase transaction .......................... (256) - (9,116) (187)
Cash equivalents acquired net of purchase acquisitions ..................... - 5,649 - -
--------- --------- --------- ---------
Net cash used in investing activities ...................................... (23,367) (28,369) (133,360) (2,731)
--------- --------- --------- ---------
7
ICICI Bank Limited
Statements of cash flows
In millions except share data
Convenience
translation
into US$
Year ended
Years ended March 31, March 31,
------------------------------------- ---------
2000 2001 2002 2002(1)
--------- --------- --------- ---------
(unaudited)
---------------------------------------------------
Rs Rs Rs US$
Financing activities
Increase in deposits, net .................................................. 37,931 30,368 160,967 3,296
Proceeds from issuances of long term debt .................................. 710 - 4,331 89
Repayment of long term debt ................................................ - (771) (1,012) (21)
Amounts borrowed under repurchase transactions ............................. - 537 20,862 427
Issuances of short term borrowings, net .................................... 702 826 (1,604) (33)
Issuance of common stock, net .............................................. 7,338 - - -
Cash dividends paid on common stock ........................................ (218) (274) (971) (20)
--------- --------- --------- ---------
Net cash provided by financing activities .................................. 46,463 30,686 182,573 3,738
--------- --------- --------- ---------
Net increase /(decrease) in cash and cash equivalents ...................... 14,385 10,583 43,069 882
Cash and cash equivalents at beginning of year ............................. 19,928 34,313 44,896 919
--------- --------- --------- ---------
Cash and cash equivalents at end of the year ............................... 34,313 44,896 87,965 1,801
========= ========= ========= =========
Non-cash items
Non-cash investing and financing activities were as follows:
Convenience
translation
into US$
Year ended
Years ended March 31, March 31,
-------------------------------------------- -----------
2000 2001 2002 2002(1)
----------- ----------- ----------- -----------
(unaudited)
------------------------------------------------------------
Rs Rs Rs US$
Acquisitions
Fair value of net assets acquired, excluding cash and cash ........ -
equivalents ..................................................... - (4,381) -
Shares issued ..................................................... - 23,539,800 - -
Transfer to held to maturity from trading assets .................. - 10,178 - -
Transfer to available for sale from trading assets ................ - 8,575 - -
Change in unrealized gain /loss on securities available for
sale, net ....................................................... 34 140 763 16
Foreclosed assets ................................................. - - 105 2
Cash paid during the year for:
Interest expense .................................................. 6,569 8,209 13,920 285
Income taxes ...................................................... 247 460 870 18
See accompanying notes to financial statements.
(1) Exchange Rate: Rs 48.83 = US$ 1.00 at March 30, 2002
8
ICICI Bank Limited
Notes to financial statements
1 Significant accounting policies
1.1 Overview
1.1.1 ICICI Bank Limited ("ICICI Bank" or "the Bank"), incorporated in
Vadodara, India is a publicly held bank providing a wide range of
banking and financial services including corporate lending and retail
lending, trade finance and treasury products. ICICI Bank is a banking
company governed by the Banking Regulations Act, 1949.
1.1.2 In fiscal 2001, ICICI Bank acquired and merged Bank of Madura into
itself in an all-stock deal accounted for under the purchase method.
These financial statements include the assets and liabilities
acquired at fair value and the results of the acquired entity from
the effective date.
1.2 Proposed business combination with ICICI Limited
1.2.1 In January 2002, the shareholders of ICICI Limited and ICICI Bank
approved a plan of combination whereby ICICI Bank will acquire ICICI
Limited in a transaction, which would be accounted for as a reverse
acquisition. Subsequent to the transaction, ICICI Bank which is the
accounting acquiree will be the surviving legal entity. The
transaction will be accounted for by the purchase method to reflect
the increase in ownership interest of ICICI Limited in ICICI Bank
from the existing 46.01% to 100%.
1.2.2 The plan of combination was subject to regulatory approvals which
were obtained in April 2002. As the transaction was consummated in
April 2002, it is not reflected in the financial statements for the
year ended March 31, 2002.
1.2.3 ICICI Bank provides banking and financial services. The operations of
ICICI Bank are governed by the Banking Regulation Act, 1949. As a
result of the acquisition, ICICI Limited is expected to be a
universal banking company offering the entire spectrum of financial
services. The acquisition is expected to reduce the cost of funds for
ICICI Limited through access to the extensive branch network and core
deposit base of ICICI Bank. Subsequent to the acquisition, the
operations of the combined entity, to be renamed as ICICI Bank, will
be governed by the Banking Regulation Act.
1.2.4 The transaction will be consummated by issuing approximately 392
million shares of ICICI Bank to the shareholders of ICICI Limited.
For accounting purposes, the aggregate purchase price will
approximate Rs 12,120 million.
9
1.2.5 The following table summarizes the preliminary allocation of the
estimated purchase price:
--------------------------------------------------------------------
As of March 31, 2002
--------------------
(Rs in millions)
--------------------
Assets
Cash and cash equivalents ..................... 48,618
Securities .................................... 119,505
Loans ......................................... 39,392
Property and equipment ........................ 2,790
Intangible assets ............................. 4,038
Other assets .................................. 11,171
--------
Total assets .................................. 225,514
========
Liabilities
Deposits ...................................... 177,321
Long-term debt ................................ 3,213
Other liabilities ............................. 32.860
Total liabilities ............................. 213,394
--------
Net assets .................................... 12,120
========
--------------------------------------------------------------------
1.3 Basis of preparation
1.3.1 The accounting and reporting policies of ICICI Bank used in the
preparation of these financial statements reflect industry practices
and conform to generally accepted accounting principles in the United
States of America ("US GAAP").
1.3.2 The preparation of financial statements in conformity with US GAAP
requires that management makes estimates and assumptions that affect
the reported amounts of assets and liabilities as of the date of the
financial statements and the reported income and expenses during the
reporting period. Management believes that the estimates used in the
preparation of the financial statements are prudent and reasonable.
Actual results could differ from these estimates. Significant
estimates and assumptions are used to account for loan loss
impairment, estimates of useful lives of assets, determination of
amortisation period for goodwill, and assumptions for computation of
retirement benefits.
1.4 Functional currency and convenience translation
1.4.1 The financial statements have been prepared in Indian rupees ("Rs"),
the national currency of India. Solely for the convenience of the
reader, the financial statements as of and for the year ended March
31, 2002 have been translated into US dollars at the noon buying rate
in New York city at March 30, 2002 for the cable transfers in rupees
as certified for customs purposes by the Federal Reserve of New York
of US$1.00 = Rs 48.83. No representation is made that the rupee
amounts have been, could have been or could be converted into US
dollars at such rate or any other rate on March 31, 2002 or at any
other certain date.
1.5 Cash equivalents
1.5.1 ICICI Bank considers all highly liquid investments, which are readily
convertible into cash and which have contractual maturities of three
months or less from the date of purchase, to be cash equivalents. The
carrying value of cash equivalents approximates fair value.
10
1.6 Securities and trading activities
1.6.1 The Bank classifies investments in fixed maturities and equity
securities into three categories based upon management's intention at
the time of purchase; securities held to maturity, trading securities
and securities available for sale. Investments in fixed maturities
include bonds, notes and redeemable preferred stocks, as well as
certain loan backed and structured securities subject to prepayment
risks. Realized gains and losses on the sale of securities are
recorded at the time of sale (trade date).
1.6.2 Securities that are held principally for resale in the near term are
recorded as trading assets. Trading securities, primarily debt
securities and foreign exchange products are recorded at fair value
with realized and unrealized gains and losses included in
non-interest income. Interest on trading securities is included in
interest income. The fair value of trading assets is based upon
quoted market prices or, if quoted market prices are not available,
the value is estimated using similar securities or pricing models.
1.6.3 Securities "held to maturity" are carried at cost, adjusted for
amortization of premiums and accretion of discounts. The Bank has the
intent and ability to hold these securities until maturity.
1.6.4 All securities not classified as held to maturity or trading
securities are classified as "available for sale". These include
securities used as part of the Bank's asset liability management
strategy, which may be sold in response to changes in interest rates,
prepayment risk, liquidity needs and similar factors. Securities
available for sale are recorded at fair value with unrealized gains
and losses recorded net of tax as a component of other comprehensive
income.
1.6.5 Any "other than temporary diminution" in the value of
held-to-maturity or securities available for sale is charged to the
income statement. "Other than temporary diminution" is identified
based on management's evaluation of the securities portfolio.
1.7 Loans
1.7.1 Loans are stated at the principal amount outstanding, net of unearned
income, if any. Loan origination fees (net of loan origination costs)
are deferred and recognized as an adjustment to yield over the period
of the loan. Interest is accrued on the unpaid principal balance and
is included in interest income. Loans include credit substitutes such
as privately placed debt instruments, preferred shares which are in
essence loans, pass through certificates (`PTCs') and loans
underlying certain PTC's where the Bank consolidates the Special
Purpose Vehicles (`SPV') established to facilitate the PTC
transaction.
1.7.2 Lease financing receivables are reported at the aggregate of lease
payments receivable and estimated residual values, net of unearned
and deferred income. Unearned income is recognized to yield a level
rate of return on the net investment in the leases.
1.7.3 Interest income is accounted on an accrual basis except in respect of
non-accrual loans, where it is recognized on a cash basis. Income
from leasing operations is accrued in a manner to provide a fixed
rate of return on outstanding investments. Interest on bills
discounted, is recognized on a straight-line basis over the tenure of
the bills. Fees from non-fund based activities such as guarantees and
letters of credit are amortized over the contracted period of the
commitment.
11
1.7.4 ICICI Bank identifies a loan as impaired when it is probable that the
Bank will be unable to collect the scheduled payments of principal
and interest due under the contractual terms of the loan agreement. A
loan is also considered to be impaired if interest or principal is
overdue for more than 180 days. The value of impaired loans is
measured at the present value of expected future cash flows
discounted at the loan's effective interest rate, at the loan's
observable market price, or the fair value of the collateral if the
recovery of the loan is solely collateral dependent. If the value of
the impaired loan is less than the recorded investment in the loan,
ICICI Bank recognizes this impairment by creating a valuation
allowance with a corresponding charge to the provision for loan
losses or by adjusting an existing valuation allowance for the
impaired loan with a corresponding charge or credit to the provision
for loan losses. A loan is also considered impaired if its terms are
modified in a trouble debt restructuring. For these accruing impaired
loans, cash receipts are typically applied to principal and interest
in accordance with the terms of the restructured loan agreement.
1.7.5 ICICI Bank considers all loans on non-accrual status to be impaired.
Commercial loans are placed on non-accrual status when doubt as to
timely collection of principal or interest exists, or when principal
or interest is overdue for 180 days or more. Delays or shortfalls in
loan payments are evaluated along with other factors to determine if
a loan should be placed on non-accrual status. Generally, loans with
delinquencies under 180 days are placed on non-accrual status only if
specific conditions indicate that impairment is probable. The
decision to place a loan on non-accrual status is also based on an
evaluation of the borrower's financial condition, collateral,
liquidation value, and other factors that affect the borrower's
ability to repay the loan in accordance with the contractual terms.
1.7.6 Generally, at the time a loan is placed on non-accrual status,
interest accrued and uncollected on the loan in the current fiscal
year is reversed from income, and interest accrued and uncollected
from the prior year is charged off against the allowance for loan
losses. Thereafter, interest on non-accrual loans is recognized as
interest income only to the extent that cash is received and future
collection of principal is not in doubt. If the collectibility of the
outstanding principal is doubtful, such interest received is applied
as a reduction of principal. When borrowers demonstrate, over an
extended period the ability to repay a loan in accordance with the
contractual terms of a loan, which the Bank classified as
non-accrual, the loan is returned to accrual status.
1.8 Allowance for loan losses
1.8.1 The allowance for credit losses represents management's estimate of
probable losses inherent in the portfolio. Loan losses deemed
uncollectible by management are charged off against the reserve,
while recoveries of amounts previously charged off are credited to
the reserve. Amounts are charged off after giving consideration to
factors such as the customer's financial condition, underlying
collateral and guarantees, and general and industry economic
conditions. The allowance for loan losses reflects management's
estimate of probable losses inherent in the portfolio, considering
evaluations of individual credits and concentrations of credit risk,
changes in the quality of the credit portfolio, levels of non accrual
loans and leases, current economic considerations, cross-border
risks, changes in the size and character of the credit risks and
other pertinent factors. The portion of the allowance for loan losses
related to loans that are identified as impaired is based on
discounted cash flows using the loan's effective interest rate or the
fair value of the collateral for collateral-dependent loans, or the
observable market price of the impaired loans.
12
1.8.2 Smaller balance homogeneous loans (including credit card receivables)
are collectively evaluated for impairment based on historical loss
experience, adjusted for changes in trends and conditions including
delinquencies and non accruals. Based on these analyses, the
allowance for loan losses is maintained at levels considered adequate
by management to also provide for probable credit losses inherent in
these portfolios.
1.9 Property and equipment
1.9.1 Property and equipment including assets under capital lease are
stated at cost, less accumulated depreciation. The cost of additions,
capital improvements and interest during the construction period are
capitalized, while repairs and maintenance are charged to expenses
when incurred.
1.9.2 Depreciation is provided over the estimated useful lives of the
assets, or lease term, whichever is shorter.
1.9.3 Property under construction and advances paid towards acquisition of
property, plant and equipment are disclosed as capital work in
progress. The interest cost incurred for funding an asset during its
construction period is capitalized based on the actual outstanding
investment in the asset from the date of purchase/expenditure and the
average cost of funds. The capitalized interest cost is included in
the cost of the relevant asset and is depreciated over the asset's
estimated useful life.
1.9.4 Capitalized cost of computer software obtained for internal use
represents costs incurred to purchase computer software from third
parties. The capitalized costs are amortized on a straight-line basis
over the estimated useful life of the software. Deposits paid towards
the acquisition of property, plant and equipment outstanding at each
balance sheet date and the cost of property, plant and equipment not
put to use before such date are disclosed under capital
work-in-progress.
1.9.5 The Bank accounts for long-lived assets in accordance with the
provisions of SFAS No. 121, "Accounting for the Impairment of
Long-Lived Assets and for Long-Lived Assets to Be Disposed Of." This
Statement requires that long-lived assets and certain identifiable
intangibles be reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not
be recoverable. Recoverability of assets to be held and used is
measured by a comparison of the carrying amount of an asset to future
net cash flows expected to be generated by the asset. If such assets
are considered to be impaired, the impairment to be recognized is
measured by the amount by which the carrying amount of the assets
exceeds the fair value of the assets. Assets to be disposed of are
reported at the lower of the carrying amount or fair value less costs
to sell.
1.10 Goodwill and intangible assets
1.10.1 Goodwill and other intangible assets such as tenancy rights are
assets, which arise or have been acquired in business combination.
Values have been assigned to the identified intangible assets based
on available evidence and are amortized on a straight line basis over
estimated useful life.
1.10.2 The Bank assesses the recoverability of goodwill by determining
whether the amortization of its balance over its remaining life can
be recovered through undiscounted future operating cash flows of the
acquired operations. The amount of goodwill impairment, if any, is
measured based on projected discounted future operating cash flows
using a discount rate reflecting the Bank's average cost of funds.
The assessment of the recoverability of goodwill will be impacted if
estimated future operating cash flows are not achieved.
13
1.11 Income taxes
1.11.1 The provision for income taxes is determined under the asset and
liability method. Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to the difference
between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases, and operating loss
carry forwards. Deferred tax assets are recognized subject to a
valuation allowance based upon management's judgement as to whether
realization is more likely than not. Deferred tax assets and
liabilities are measured using enacted tax rates expected to apply to
taxable income in the years in which temporary differences are
expected to be received and settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in the
income statement in the period of change.
1.12 Trading assets and liabilities
1.12.1 Trading assets and liabilities include securities and derivatives and
are recorded at either market value or where, market prices are not
readily available, fair value, which is determined under an
alternative approach. The determination of market or fair value
considers various factors including stock exchange quotations, time
value and volatility factors underlying derivatives, counterparty
credit quality and derivative transaction cash maintenance during
that period.
1.12.2 Derivatives used for trading purposes include forwards, exchange
contracts, interest rate and currency swaps. The fair value of the
derivatives is based on the liquid market prices evidenced by
exchange traded prices, broker dealer quotations or prices of other
transactions with similarly related counter parties. Derivatives in a
net receivable position are reported as trading assets. Similarly
derivatives in a net payable position are reported on trading
liabilities.
1.13 Employee benefit plans
1.13.1 ICICI Bank provides a variety of benefit plans to eligible employees.
1.13.2 Current service costs for defined benefit plans are accrued in the
period to which they relate. Prior service costs, if any, resulting
from amendments to the plans are recognized and amortized over the
remaining period of service of the employees.
1.14 Foreign currency translation
1.14.1 Revenue and expenses in foreign currency are accounted for at the
exchange rate on the date of the transaction. Foreign currency
balances at year-end are translated at the year-end exchange rates
and the revaluation gains and losses are adjusted through the income
statement.
1.15 Debt issuance costs
1.15.1 Debt issuance costs are amortized over the tenure of the debt.
1.16 Dividends
1.16.1 Dividends on common stock and the related dividend tax are recorded
as a liability at the point of their approval by the board of
directors.
14
1.17 Earnings per share
1.17.1 Basic earnings per share is computed by dividing net income by the
weighted average number of common shares outstanding for the period.
Diluted earnings per share reflect the dilution that could occur if
securities or other contracts to issue common stock are converted.
1.18 Stock-based compensation
1.18.1 The Bank accounts for stock-based compensation issued to employees
using the intrinsic value method under the provisions of Accounting
Principles Board (APB) No. 25 Accounting for Stock Issued to
Employees. The Bank's stock options are typically compensatory with
the exercise price equal to the fair value of the stock on the date
of grant, and accordingly, no expense is recognized.
1.18.2 Options granted to employees of ICICI Limited are accounted for in
accordance with Statement of Financial Accounting Standard (SFAS) No.
123 Accounting for Stock-Based Compensation. The Bank values options
issued using an option pricing model and recognizes the expenses over
the period in which the options vest.
1.19 Reclassifications
1.19.1 Certain amounts in fiscal 2000 and fiscal 2001 were reclassified to
conform with the presentation in fiscal 2002. These reclassifications
have no effect on the stockholders' equity or net income as
previously reported.
1.20 Accounting changes
1.20.1 On April 1, 2001 ICICI Bank adopted SFAS No. 133, "Accounting for
Derivative Instruments and Hedging Activities", as amended by SFAS
138, Accounting for Certain Derivative Instruments and Certain
Hedging Activities. SFAS No. 133 requires that an entity recognize
all derivatives as either assets or liabilities measured at fair
value. The accounting for changes in the fair value of a derivative
depends on the use of the derivative. Derivatives that are not
designated as part of a hedging relationship must be adjusted to fair
value through income. If the derivative is a hedge, depending on the
nature of the hedge, the effective portion of the hedge's change in
fair value is either (1) offset against the change in fair value of
the hedged asset, liability or firm commitment through income or (2)
held in equity until the hedged item is recognized in income. The
ineffective portion of a hedge's change in fair value is immediately
recognized in income. The majority of derivatives entered into by
ICICI Bank are for trading purposes. The cumulative effect, net of
tax, of adoption of SFAS 133 at April 1, 2001 of Rs 16 million is
included in net income.
1.20.2 Prior to April 1, 2001, currency swaps entered into for non-trading
purposes, although considered effective as economic hedges, did not
qualify for hedge accounting under SFAS 133. These currency swaps
were accounted for on an accrual basis.
15
1.21 Risk management instruments
1.21.1 The Bank manages its exposures to market rate movements by modifying
the asset and liability mix, either directly or through the use of
derivative financial products including interest rate swaps, cross
currency swaps and forwards. To qualify as a hedge, the hedge
relationship is designated and formally documented at inception
detailing the particular risk management objective and strategy for
the hedge which includes the item and risk that is being hedged, the
derivative that is being used, as well as how effectiveness is being
assessed. A derivative must be highly effective in accomplishing the
objective of offsetting either changes in fair value or cash flows
for the risk being hedged. For fair value hedges, in which
derivatives hedge the fair value of assets, liabilities or firm
commitments, changes in the fair value of derivatives are reflected
in other non-interest income, together with changes in the fair value
of the related hedged item. The net amount representing hedge
ineffectiveness, is reflected in current earnings. ICICI Bank's fair
value hedges are primarily the hedges of fixed-rate-long-term debt.
2 Cash and cash equivalents
2.1.1 Cash and cash equivalents at March 31, 2002 include a balance of Rs
14,610 million (March 31, 2001: Rs 10,968 million) maintained with
the Reserve Bank of India in accordance with the guidelines governing
cash reserve requirements. This balance is subject to withdrawal and
usage restrictions.
3 Trading assets
3.1.1 A listing of the trading assets is set out below:
----------------------------------------------------------------------------------------------
At March 31,
---------------------
2001 2002
-------- --------
(in Rs millions)
Government of India securities ..................................... 14,055 20,765
Debentures ......................................................... 1,808 538
Bonds .............................................................. 2,348 727
Fair value of derivatives and foreign exchange contracts ........... 127 541
Commercial paper ................................................... 387 -
Mutual fund units .................................................. - 3,504
-------- --------
Total .............................................................. 18,725 26,075
======== ========
----------------------------------------------------------------------------------------------
3.1.2 At March 31, 2002, trading assets included certain securities
amounting to Rs Nil (March 31, 2001:Rs 32 million), which were
pledged in favour of certain banks against funds transfer facilities.
16
4 Securities
4.1.1 The portfolio of securities is set out below:
----------------------------------------------------------------------------------------------------------------
At March 31, 2001
-----------------------------------
Gross Gross
Book unrealized unrealized Fair
value gain loss Value
(in Rs millions)
------------------------------------------------
Securities, held to maturity
Government of India securities ............................ 10,944 580 - 11,524
======== ======== ======== ========
Securities, available for sale
Corporate debt securities ................................. 6,057 210 (27) 6,240
Government of India securities ............................ 15,765 302 (7) 16,061
-------- -------- -------- --------
Total debt securities ..................................... 21,822 512 (34) 22,301
Mutual fund units ......................................... 2,513 4 (142) 2,375
Others .................................................... 111 - - 111
-------- -------- -------- --------
Total securities, available for sale ...................... 24,446 516 (176) 24,787
======== ======== ======== ========
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
At March 31, 2002
-----------------------------------
Gross Gross
Book unrealized unrealized Fair
value gain loss Value
(in Rs millions)
------------------------------------------------
Securities, held to maturity
Government of India securities ............................ 24,294 4,474 - 28,768
======== ======== ======== ========
Securities, available for sale
Corporate debt securities ................................. 4,437 142 - 4,579
Government of India securities ............................ 149,280 1,492 - 150,772
-------- -------- -------- --------
Total debt securities ..................................... 153,717 1,634 - 155,351
Mutual fund units ......................................... 350 - (57) 293
Others .................................................... 122 - (8) 114
-------- -------- -------- --------
Total securities, available for sale ...................... 154,189 1,634 (65) 155,758
======== ======== ======== ========
----------------------------------------------------------------------------------------------------------------
4.1.2 At March 31, 2002, available for sale securities included certain
securities with fair value amounting to Rs 21,360 million (March 31,
2001: Rs Nil), which are pledged in favour of certain banks against
funds transfer facilities and borrowings.
Income from securities, available for sale
4.1.3 A listing of interest, dividends, gross realized gains and gross
realized losses on available for sale securities is set out below:
----------------------------------------------------------------------------------
Year ended March 31
-------------------------------------
2000 2001 2002
------- ------- -------
(in Rs millions)
Interest ................................ 358 853 3,625
Dividends ............................... 326 364 84
------- ------- -------
Total interest and dividends ............ 684 1,217 3,709
Gross realized gain ..................... 259 114 1,031
Gross realized losses ................... (184) (498) (159)
------- ------- -------
Total ................................... 759 833 4,581
======= ======= =======
----------------------------------------------------------------------------------
17
Maturity profile of debt securities
Held to Maturity Securities
4.1.4 Maturity profile of securities held to maturity at March 31, 2001 and
March 31, 2002 is set out below:
----------------------------------------------------------------------------------------------------
At March 31, 2001 At March 31, 2002
---------------------- ----------------------
Amortized Fair Amortized Fair
cost Value cost Value
-------- -------- -------- --------
(in Rs millions)
Government of India securities
Less than one year ............................ - - - -
One to five years ............................. 2,938 3,077 4,188 4,702
Five to ten years ............................. 6,380 6,726 9,288 10,753
More than ten years ........................... 1,626 1,721 10,818 13,313
-------- -------- -------- --------
Total ......................................... 10,944 11,524 24,294 28,768
======== ======== ======== ========
----------------------------------------------------------------------------------------------------
Available for sale securities
4.1.5 Maturity profile of securities available for sale which have fixed
contractual maturities at March 31, 2001 and March 31, 2002 is set
out below:
----------------------------------------------------------------------------------------------------
At March 31, 2001 At March 31, 2002
---------------------- ----------------------
Amortized Fair Amortized Fair
cost Value cost Value
-------- -------- -------- --------
(in Rs millions)
Corporate debt securities
Less than one year ............................ 1,835 1,849 996 992
One to five years ............................. 3,737 3,876 1,718 1,782
More than five years .......................... 485 515 1,723 1,805
-------- -------- -------- --------
Total ......................................... 6,057 6,240 4,437 4,579
Government of India securities
Less than one year ............................ 5,963 5,971 78,860 79,316
One to five years ............................. 6,843 7,095 44,633 45,123
More than five years .......................... 2,959 2,995 25,787 26,333
-------- -------- -------- --------
Total ......................................... 15,765 16,061 149,280 150,772
======== ======== ======== ========
----------------------------------------------------------------------------------------------------
5 Loans and leases
5.1.1 A listing of loans by category is set out below:
-----------------------------------------------------------------------------------------------------
At March 31,
------------------------
2001 2002
-------- --------
(in Rs millions)
Working capital finance .............................................. 57,316 37,340
Term loans - commercial .............................................. 9,483 7,313
Credit substitutes ................................................... 23,624 23,035
Lease financing ...................................................... 944 820
Retail loans and credit card receivables ............................. 4,909 7,150
-------- --------
Total loans .......................................................... 96,276 75,658
Allowance for loan losses ............................................ (2,890) (2,820)
Unearned income ...................................................... (356) (364)
-------- --------
Net loans ............................................................ 93,030 72,474
======== ========
-----------------------------------------------------------------------------------------------------
18
5.1.2 As at March 31, 2002, working capital finance include debit balances
in savings and current accounts of Rs 3,765 million and loans given
to persons domiciled outside India of Rs 620 million (March 31, 2001:
Rs 4,695 million and Rs 951 million respectively).
5.1.3 Generally, the working capital advances are secured by a first lien
on current assets, principally inventory and receivables.
Additionally, in certain cases ICICI Bank may obtain additional
security through a first or second lien on property and equipment, a
pledge of financial assets like marketable securities and
corporate/personal guarantees. The term loans are secured by a first
lien on the property and equipment and other tangible assets of the
borrower.
Corporate debt securities reported as loans (credit substitutes)
5.1.4 The Portfolio of credit substitutes is set out below:
--------------------------------------------------------------------------------------------------------------------------
At March 31, 2001 At March 31, 2002
----------------------------------------- ------------------------------------------
Amortized Gross Gross Fair Amortized Gross Gross Fair
cost unrealized unrealized value cost unrealized unrealized value
gain loss gain loss
(in Rs millions) (in Rs millions)
Available for sale ..... 488 - - 488 2,944 42 43 2,943
Held to maturity ....... 23,136 98 - 23,234 20,091 208 - 20,299
--------------------------------------------------------------------------------------------------------------------------
Income from credit substitutes available for sale
5.1.5 A listing of income from credit substitutes available for sale is set
out below:
------------------------------------------------------------------------------
Year ended March 31,
--------------------------------------
2000 2001 2002
-------- -------- --------
(in Rs millions)
Interest ......................... - - 90
Dividends ........................ - - -
-------- -------- --------
Total ............................ - - 90
======== ======== ========
Gross realized gain .............. - - 18
Gross realized loss .............. - - -
-------- -------- --------
Total ............................ - - 18
======== ======== ========
------------------------------------------------------------------------------
Net investment in leasing activities
5.1.6 Contractual maturities of ICICI Bank's net investment in leasing
activities and its components, which are included in loans, are set
out below:
---------------------------------------------------------------------
(in Rs millions)
----------------
Gross finance receivable for the year ending March 31....
2003 .................................................... 265
2004 .................................................... 96
2005 .................................................... 87
2006 .................................................... 82
2007 & beyond ........................................... 369
--------
899
Less: Unearned income ................................... 287
Security deposits ................................. 79
--------
Investment in leasing and other receivables ............. 533
========
---------------------------------------------------------------------
19
Maturity profile of loans
5.1.7 A listing of each category of gross loans other than net investment
in leases and other receivables by maturity is set out below:
----------------------------------------------------------------------------------------------------------------
At March 31, 2001
-------------------------------------------------
Up to 1 1-5 years More than Total
Year 5 years
---------- ---------- ---------- ----------
(in Rs millions)
Term loan .................................................. 3,865 4,204 1,414 9,483
Working capital finance .................................... 54,798 2,518 - 57,316
Credit substitutes ......................................... 6,907 12,794 3,923 23,624
Retail loans and credit card receivables ................... 4,116 728 65 4,909
---------- ---------- ---------- ----------
Total ...................................................... 69,686 20,244 5,402 95,332
========== ========== ========== ==========
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
At March 31, 2002
-------------------------------------------------
Up to 1 1-5 years More than Total
Year 5 years
---------- ---------- ---------- ----------
(in Rs millions)
Term loan .................................................. 2,457 3,793 1,063 7,313
Working capital finance .................................... 35,413 1,856 71 37,340
Credit substitutes ......................................... 7,400 14,296 1,339 23,035
Retail loans and credit card receivables ................... 6,357 772 21 7,150
---------- ---------- ---------- ----------
Total ...................................................... 51,627 20,717 2,494 74,838
========== ========== ========== ==========
----------------------------------------------------------------------------------------------------------------
Interest and fees on loans
5.1.8 A listing of interest and fees on loans (net of unearned income) is
set out below:
------------------------------------------------------------------------------------------------------
Year ended March 31,
-----------------------------------------
2000 2001 2002
------- ------- -------
(in Rs millions)
Working capital finance .............................. 2,666 4,469 5,680
Term loan ............................................ 480 847 940
Credit substitutes ................................... 981 1,539 2,669
Leasing and related activities ....................... 14 22 (27)
Retail loans and credit card receivables ............. 296 542 1,065
------- ------- -------
Total ................................................ 4,437 7,419 10,327
======= ======= =======
------------------------------------------------------------------------------------------------------
20
Impaired loans
5.1.9 A listing of impaired loans is set out below:
------------------------------------------------------------------------------------------
At March 31,
-----------------------
2001 2002
-------- --------
(in Rs millions)
Working capital finance ..................................... 3,700 3,665
Term loan ................................................... 1,242 1,041
Credit substitutes .......................................... 121 86
Leasing and related activities .............................. 227 310
Credit card receivables ..................................... 43 355
-------- --------
Total ....................................................... 5,333 5,457
Related allowance for loan losses (1) ....................... (2,844) (2,774)
-------- --------
Impaired loans net of valuation allowance ................... 2,489 2,683
======== ========
Impaired loans with valuation allowance ..................... 5,319 5,448
Impaired loans without valuation allowance .................. 14 9
-------- --------
Total ....................................................... 5,333 5,457
======== ========
Interest foregone on non-performing assets .................. 495 451
Average non-performing loans ................................ 3,376 5,395
------------------------------------------------------------------------------------------
(1) Related allowance for loan losses does not include general
provision on loans of Rs 46 million (March 31, 2001: Rs 46 million).
Concentration of credit risk
5.1.10 Concentrations of credit risk exist when changes in economic,
industry or geographic factors similarly affect groups of
counterparties whose aggregate credit exposure is material in
relation to ICICI Bank's total credit exposure. ICICI Bank's
portfolio of financial instruments is broadly diversified along
industry, product and geographic lines within the country.
Allowance for loan losses
5.1.11 A listing of the changes in allowance for loan losses is set out
below :
-------------------------------------------------------------------------------------------------------------------------
Year ended March 31,
--------------------------------
2000 2001 2002
-------- -------- --------
(in Rs millions)
Allowance for loan losses at beginning of the year ..................................... 880 748 2,890
Additions
Provisions for loan losses, net of release of provisions as a result of cash collections 427 1,082 1,722
Provision for loan losses on loans acquired from Bank of Madura ........................ - 1,572 -
-------- -------- --------
1,307 3,402 4,612
Loans charged off ...................................................................... (559) (512) (1,792)
-------- -------- --------
Allowance for loan losses at end of the year ........................................... 748 2,890 2,820
======== ======== ========
-------------------------------------------------------------------------------------------------------------------------
Troubled debt restructuring
5.1.12 The Bank classifies a debt restructuring as a troubled debt
restructuring when it grants a concession, that it would not
otherwise consider to a borrower in financial difficulties.
21
5.1.13 Loans at March 31, 2002 include loans aggregating Rs 613 million
(March 31, 2001: Rs 467 million), which are currently under a scheme
of debt restructuring and which have been identified as impaired
loans. The gross recorded investment in these loans is Rs 785 million
(March 31, 2001: Rs 890 million) against which an allowance for loan
losses aggregating Rs 172 million (March 31, 2001: Rs 423 million)
has been established. Income on restructured loans would have been Rs
144 million for year ended March 31, 2002 (March 31, 2001: Rs 101
million) based on original terms, and was Rs 100 million based on the
restructured terms (March 31, 2001: Rs 85 million).
5.1.14 There are no commitments to lend incremental funds to any borrower
who is party to a troubled debt restructuring.
6 Property and equipment
6.1.1 A listing of property and equipment by asset category is set out
below:
---------------------------------------------------------------------------------------------------------------
At March 31,
------------------------
2001 2002
-------- --------
(in Rs millions)
Land ........................................................................... 286 286
Building ....................................................................... 1,954 2,185
Equipment and furniture ........................................................ 2,924 4,025
Capital work in progress ....................................................... 216 341
-------- --------
5,380 6,837
Accumulated depreciation ....................................................... (1,460) (2,006)
-------- --------
Net book value of property and equipment ....................................... 3,920 4,831
======== ========
---------------------------------------------------------------------------------------------------------------
6.1.2 Equipment and furniture includes an amount of Rs 394 million as on
March 31, 2002 (March 31, 2001: Rs 246 million) for automated teller
machines taken on capital lease. The following is a summary of future
minimum lease rental commitments for non-cancelable leases:
-----------------------------------------------------------------------------------------------
March 31
(in Rs
millions)
-----------
Year ending
2003 ........................................................................... 42
2004 ........................................................................... 54
2005 ........................................................................... 77
2006 ........................................................................... 103
2007 ........................................................................... 130
Thereafter ..................................................................... 241
--------
Total minimum lease commitments ................................................ 647
========
-----------------------------------------------------------------------------------------------
7 Intangible assets
7.1.1 Intangible assets at March 31, 2002 include goodwill amounting to Rs
2,353 million (March 31, 2001: Rs 2,568 million) and tenancy rights
amounting to Rs 44 million(March 31, 2001: Rs 73 million). During the
year the bank amortized Rs 215 million of goodwill and Rs 29 million
of tenancy rights
22
8 Other assets
8.1.1 Other assets at March 31, 2002 include interest accrued of Rs 4,488
million (March 31, 2001: Rs 2,248 million), advance taxes (net of
provisions) Rs 1,449 million (March 31, 2001: Rs 1,051 million),
deposits for leased premises and utilities of Rs 744 million (March
31, 2001: Rs 346 million), foreclosed assets held for resale of Rs
235 million (March 31, 2001: Rs 139 million) and prepaid expenses of
Rs 11 million (March 31, 2001: Rs 13 million).
9 Deposits
9.1.1 Deposits include demand deposits, which are non-interest-bearing and
savings and time deposits, which are interest-bearing. A listing of
deposits is set out below:
-----------------------------------------------------------------------------------------------
At March 31,
-----------------------
2001 2002
--------- ---------
(in Rs millions)
Interest bearing
Savings deposits .................................................. 18,786 24,970
Time deposits ..................................................... 119,097 270,677
--------- ---------
137,883 295,647
Non-interest bearing
Demand deposits ................................................... 26,371 29,574
--------- ---------
Total ............................................................. 164,254 325,221
========= =========
-----------------------------------------------------------------------------------------------
9.1.2 Maturity profile of deposits is set out below:
-----------------------------------------------------------------------------------------------
At March 31,
-----------------------
2001 2002
--------- ---------
(in Rs millions)
Less than one year (include savings and demand liabilities) ....... 111,215 185,264
One to three years ................................................ 51,229 134,480
Three to five years ............................................... 1,097 4,035
Greater than five years ........................................... 713 1,442
--------- ---------
Total deposits .................................................... 164,254 325,221
========= =========
-----------------------------------------------------------------------------------------------
9.1.3 At March 31, 2002, aggregate of deposits with amounts greater than
Rupees ten million was Rs 175,326 million. Demand and savings
deposits are included in less than one year bucket.
10 Short-term borrowings
10.1.1 Short term borrowings at March 31, 2002 represents borrowings from
Reserve Bank of India for a term of six months. These funds are in
the nature of export refinance with an interest rate of 6.5% per
annum. The average level of such borrowings, during year ended March
31, 2002 was Rs 888 million (March 31, 2001: Rs 1,713 million). There
were no unused lines of credit available to the Bank at March 31,
2002 (March 31, 2001: Rs Nil).
23
11 Repurchase transactions
11.1.1 During the year, ICICI Bank has undertaken repurchase transactions in
Government of India securities. The maximum amount of outstanding
repurchase agreements at any month-end during the period was Rs
21,399 million (March 31, 2001: Rs 537 million). The average level of
repurchase transactions during year ended March 31, 2002 was Rs 1,754
million (March 31, 2001: Rs 78 million). The repurchase contracts
outstanding on March 31, 2002 were Rs 21,399 million (March 31, 2001:
Rs 537 million) and were collateralised by a pledge of securities in
the Bank's AFS portfolio with fair value of Rs 21,360 million (March
31, 2001: Rs 537 million).
11.1.2 ICICI Bank has also undertaken reverse repurchase transactions in
Government of India securities. The maximum amount of outstanding
reverse repurchase agreements at any month-end during the period was
Rs 9,116 million (March 31, 2001: Rs Nil). The average level of
reverse repurchase transactions outstanding during year ended March
31, 2002 was Rs 584 million (March 31, 2001: Rs 206 million). The
reverse repurchase contracts outstanding on March 31, 2002 was Rs
9,116 million (March 31, 2001: Rs Nil ).
12 Trading liabilities
12.1.1 Trading liabilities at March 31, 2002 includes borrowings from banks
in the interbank call money market of Rs 274 million (March 31, 2001:
Rs 3,978 million) and fair value of losses on derivatives and foreign
exchange contracts of Rs 646 million (March 31, 2001: Rs Nil).
13 Long-term debt
13.1.1 Long-term debt, represent debt with an original maturity of greater
than one year, net of unamortized debt issuance costs. Long term debt
bears interest at fixed contractual rates ranging from 6.50% to
17.25%. In fiscal 2002, long term debt includes Rs 2,270 million
raised by the Bank during the current year for a period of 69 months
at 9.5%. A listing of long-term debt by residual maturity is set out
below:
-----------------------------------------------------------------------------------------------------------
At March 31, At March 31,
2001 2002
------------------------------ ------------------------------
(in Rs millions) % (in Rs millions) %
-----------------------------------------------------------------
Maturity
2003 .................................. 461 19 1,370 24
2004 .................................. 1,136 47 1,175 20
2005 .................................. 101 4 132 2
2006 .................................. - - 71 1
2007 and later ........................ 723 30 2,992 53
------ ------ ------ ------
Total ................................. 2,421 100 5,740 100
====== ====== ====== ======
-----------------------------------------------------------------------------------------------------------
14 Other liabilities
14.1.1 Other liabilities at March 31, 2002 include outward clearing suspense
of Rs 5,988 million (March 31, 2001: Rs 5,656 million), accounts
payable of Rs 2,649 million (March 31, 2001: Rs 3,806 million),
interest accrued but not due on deposits amounting to Rs 1,752
million (March 31, 2001: Rs 557 million), cash margins on
LCs/guarantees of Rs 69 million (March 31, 2001: Rs 80 million) and
obligations on account of capital leases amounting to Rs 318 million
(March 31, 2001: Rs 251 million).
24
15 Earnings per share
15.1.1 A computation of earnings per share is set out below:
--------------------------------------------------------------------------------------------------------------------------
Year ended March 31,
---------------------------------------------------------------
2000 2001 2002
------------------- ------------------- -------------------
(in Rs millions except per share data)
---------------------------------------------------------------
Basic Fully Basic Fully Basic Fully
diluted diluted diluted
Earnings
Net income before cumulative effect of accounting change 1,402 1,402 1,308 1,308 2,021 2,021
Cumulative effect of accounting change, net of tax ..... - - - - 16 16
-------- -------- -------- -------- -------- --------
Net income ............................................. 1,402 1,402 1,308 1,308 2,037 2,037
======== ======== ======== ======== ======== ========
Common stock
Weighted average common stock outstanding .............. 165.09 165.09 198.24 198.24 220.36 220.36
Dilutive effect of employee stock options .............. - 0.02 - - - -
-------- -------- -------- -------- -------- --------
Total .................................................. 165.09 165.11 198.24 198.24 220.36 220.36
======== ======== ======== ======== ======== ========
Earnings per share
Before cumulative effect of accounting change .......... 8.49 8.49 6.60 6.60 9.17 9.17
Cumulative effect of accounting change, net of tax ..... - - - - 0.07 0.07
-------- -------- -------- -------- -------- --------
Net income ............................................. 8.49 8.49 6.60 6.60 9.24 9.24
======== ======== ======== ======== ======== ========
--------------------------------------------------------------------------------------------------------------------------
15.1.2 Options to purchase 1,636,125 equity shares and 3,172,825 equity
shares granted to employees at a weighted average exercise price of
Rs 171.90 and Rs 171.45 were outstanding as at March 31, 2001 and
2002, respectively, but were not included in the computation of
diluted earnings per share because the exercise price of the options
was greater than the average market price of the equity shares during
the period.
16 Regulatory matters
16.1.1 The Company is a banking company within the meaning of the Indian
Banking Regulation Act, 1949, registered with and subject to
examination by the Reserve Bank of India.
Statutory liquidity requirements
16.1.2 In accordance with the Banking Regulation Act, 1949, the Bank is
required to maintain a specified percentage of its net demand and
time liabilities by way of liquid unencumbered assets like cash, gold
and approved securities. The amount of securities required to be
maintained at March 31, 2002 was Rs 70,079 million (March 31, 2001:
Rs 38,087 million).
Capital adequacy requirements
16.1.3 ICICI Bank is subject to the capital adequacy requirements set by the
Reserve Bank of India, which stipulate a minimum ratio of capital to
risk adjusted assets and off-balance sheet items, at least half of
which must be Tier I capital, of 9% be maintained. The capital
adequacy ratio of the Bank calculated in accordance with the Reserve
Bank of India guidelines at March 31, 2002 was 16.12% (March 31,
2001: 11.57%).
25
Restricted retained earnings
16.1.4 Retained earnings at March 31, 2002 computed as per generally
accepted accounting principles of India include profits aggregating
to Rs 2,494 million (March 31, 2001: Rs 1,844 million) which are not
distributable as dividends under the Banking Regulation Act, 1949.
These relate to requirements regarding earmarking a part of the
profits under banking laws. Utilization of these balances is subject
to approval of the Board of Directors and needs to be reported to
Reserve Bank of India. Statutes governing the operations of ICICI
Bank mandate that dividends be declared out of distributable profits
only after the transfer of at least 25% of net income each year,
computed in accordance with current banking regulations, to a
statutory reserve. Additionally, the remittance of dividends outside
India is governed by Indian statutes on foreign exchange
transactions.
17 Business segments
Segmental disclosures
17.1.1 ICICI Bank's operations are solely in the financial services industry
and consist of providing traditional banking services, primarily
commercial lending activities, treasury operations and retail banking
activities. ICICI Bank carries out these activities through offices
in India. Effective March 10, 2001, the Bank acquired Bank of Madura
Limited, a private sector bank in India. Immediately following the
merger, the results of the Bank of Madura were being reviewed
separately. During the current year the operations of Bank of Madura
were completely integrated with the operations of ICICI Bank and Bank
of Madura is no longer considered a segment.
17.1.2 Until the financial year ended March 31, 2000, the Bank had been
analysing the business information and making the operating decisions
based upon reviews of the Bank's operations as a whole. However, with
continued growth in business, the Bank reorganized its business in
three Strategic Business Units ('SBUs') namely Retail Banking,
Corporate Banking and Treasury. Each of these SBUs caters to
different segments of customers and offers different financial
products and services. Retail Banking activity includes mobilising of
funds from retail depositors by offering them a wide range of
financial products and providing services through various channels
like Branches, ATM, Internet banking, Phone banking and Mobile
banking. Retail Banking SBU also offers consumer lending services
namely Credit Cards, loans against deposits and securities etc.
Corporate Banking SBU (CB-SBU) provides financial products and
services to Corporates, Institutions and Government organizations.
CB-SBU provides medium and short-term credit, fee and commission
based services (e.g., documentary credits, letters of credit, forward
contracts etc.) accepts deposits from corporate customers and also
provides cash management services. The Treasury SBU manages the
treasury operations of the bank through market operations. It also
invests in various money market instruments, debt instruments, Shares
and Debentures.
26
17.1.3 The following table gives information on segmental revenues and
segmental profits for year ended March 31, 2001 and March 31, 2002
respectively:
(Rs in million)
--------------------------------------------------------------------------------------------------------------------
Fiscal 2001
SBU-Retail SBU-Corporate SBU- Bank of Eliminations Total
Banking Banking Treasury Madura
Revenue from external customers
Interest revenue........................... 1,464 7,932 2,777 233 - 12,406
Other revenue.............................. 238 984 468 64 - 1,754
Revenue from other operating segments
Interest & Other revenue................... 4,323 - 267 - (4,590) -
Total Revenue 6,025 8,916 3,512 297 (4,590) 14,160
Interest expenses to external customers.... 4,406 2,025 1,808 169 - 8,408
Interest & other expenses from other Note 1
operating segments...................... - 3,264 1,326 - (4,590) -
Depreciation............................... 284 142 15 36 - 477
Provision for credit losses................ 30 1,052 - - - 1,082
Other expenses............................. 1,927 550 116 34 - 2,627
Income/(loss) before Income Taxes.......... (622) 1,883 247 58 - 1,566
Income tax expense/(benefit)............... (101) 308 41 10 - 258
Net Income/(loss).......................... (521) 1,575 206 48 - 1,308
--------------------------------------------------------------------------------------------------------------------
(Rs in million)
--------------------------------------------------------------------------------------------------------------------
Fiscal 2002
SBU-Retail SBU-Corporate SBU- Eliminations Total
Banking Banking Treasury
Revenue from external customers
Interest revenue........................... 4,389 11,645 4,803 - 20,837
Other revenue.............................. 685 1,736 2,792 - 5,213
Revenue from other operating segments
Interest & Other revenue................... 9,517 - - (9,517) -
Total Revenue 14,591 13,381 7,595 (9,517) 26,050
Interest expenses to external customers.... 9,424 3,190 2,502 - 15,116
Interest & other expenses from other
operating segments ..................... - 6,259 3,258 (Note 1) -
Depreciation............................... 505 88 43 (9,517) 636
Provision for credit losses................ 268 1,454 - - 1,722
Other expenses............................. 3,843 1,015 766 - 5,624
Income/(loss) before Income Taxes.......... 551 1,375 1,026 - 2,952
Income tax expense/(benefit)............... 161 460 310 - 931
Income before cumulative effect of
accounting changes...................... 390 915 716 - 2,021
Cumulative effect of accounting changes,
net of tax.............................. - 16 - - 16
Net Income/(loss).......................... 390 931 716 - 2,037
--------------------------------------------------------------------------------------------------------------------
17.1.4 Note 1: Interest and other revenues from other segments represent the
notional interest charged by 'Retail Banking' to other segments, on
funds mobilized by it through deposits and which were utilized by
other segments for lending and investment purposes. This item also
includes notional management fee charged by 'Treasury' from other
segments for managing part of their assets and liabilities.
27
17.1.5 A listing of certain assets of reportable segments for year ended
March 31, 2001 and March 31, 2002 are set out below:
(Rs in million)
---------------------------------------------------------------------------------------------------------
Fiscal 2001
Particulars SBU-Retail SBU-Corporate SBU- Bank of Eliminations Total
Banking Banking Treasury Madura
Property and equipment .... 2,270 586 56 1,008 - 3,920
Other assets .............. 30,332 115,468 37,888 32,930 - 216,618
Total assets .............. 32,602 116,054 37,944 33,938 - 220,538
---------------------------------------------------------------------------------------------------------
(Rs in million)
---------------------------------------------------------------------------------------------------------
Fiscal 2002
Particulars SBU-Retail SBU-Corporate SBU- Eliminations Total
Banking Banking Treasury
Property and equipment..... 3,565 896 370 - 4,831
Other assets............... 69,720 125,645 204,609 - 399,974
Total assets............... 73,285 136,541 204,979 - 404,805
---------------------------------------------------------------------------------------------------------
17.2 Geographic distribution
17.2.1 The business operations of the Bank are largely concentrated in
India. Activities outside India are restricted to resource
mobilization in the international markets. The assets and net income
from foreign operations are immaterial.
Major customers
17.2.2 ICICI Bank provides banking and financial services to a wide base of
customers. There is no major customer which contributes more than 10%
of total revenues.
18 Employee benefits
18.1 Retirement benefits
Gratuity
18.1.1 In accordance with Payment of Gratuity Act, 1972, ICICI Bank provides
for gratuity a defined benefit retirement plan covering all
employees. The plan provides a lump sum payment to vested employees
at retirement, on death while in employment or on termination of
employment based on the respective employee's salary and the years of
employment with ICICI Bank. The gratuity benefit conferred by ICICI
Bank on its employees is equal to or greater than the statutory
minimum.
18.1.2 ICICI Bank provides the gratuity benefit through annual contributions
to either a fund administered by a Board Trustees and managed by Life
Insurance Corporate of India or to a fund administered and managed by
a Board of trustees. ICICI Bank's liability for provision of gratuity
benefit to its employees is determined periodically through actuarial
valuations in accordance with SFAS 87.
28
18.1.3 The following table sets forth the funded status of the plan and the
amounts recognized in the financial statements:
At March 31,
----------------
2001 2002
---- ----
(in Rs million)
-----------------------------------------------------------------------------------------
Change in benefit obligations
Projected Benefit obligations at beginning of the year/period . 12 336
Obligations assumed on acquisition ............................ 317 -
Service cost .................................................. 3 24
Interest cost ................................................. 4 34
Benefits paid ................................................. (1) (11)
Actuarial (gain) / loss on obligations ........................ 1 9
--- ---
Projected benefit obligations at the end of the period ........ 336 392
Change in plan assets
Fair value of plan assets at beginning of the period .......... 17 333
Fair value of plan assets acquired on acquisition ............. 303 -
Expected return on plan assets ................................ 3 33
Employer contributions ........................................ 6 48
Gain/(loss) on plan assets .................................... 4 (1)
Benefits paid ................................................. - (11)
--- ---
Plan assets at the end of the period .......................... 333 402
Net prepaid asset/(accrued liability) ......................... (3) 10
--- ---
-----------------------------------------------------------------------------------------
18.1.4 The components of the net gratuity cost for the year ended March 31,
2001 and year ended March 31, 2002 are given below:
-----------------------------------------------------------------------------------------
At March 31,
----------------
2001 2002
---- ----
(Rs in million)
-------------------
Service cost.................................................... 3 24
Interest cost................................................... 4 34
Expected return on assets....................................... (3) (33)
Actuarial (gain) / loss......................................... (3) 10
--- ---
Net gratuity cost............................................... 1 35
-----------------------------------------------------------------------------------------
18.1.5 Assumptions used in accounting for the gratuity plan are given below:
-----------------------------------------------------------------------------------------
At March 31,
----------------
2001 2002
---- ----
Discount Rate................................................... 11% 10%
Rate of increase in the compensation levels..................... 8% 8.0 - 8.5%
Rate of return on plan assets................................... 10.5% 10%
-----------------------------------------------------------------------------------------
Pension Plan
18.1.6 ICICI Bank provides for a pension, a deferred benefit retirement plan
covering certain employees. The plan provides for pension payment on
a monthly basis to these employees on their retirement based on the
respective employees salary and years of employment with ICICI Bank.
Employees covered by the pension plan are not eligible for benefits
under the provident fund plan, a defined contribution plan.
18.1.7 The pension plan is funded through or periodic contributions to a
fund set up by ICICI Bank and administrated by a Board of Trustees.
Such contributions are actuarially determined in accordance with the
provisions of SFAS 87.
29
18.1.8 The following table sets forth the funded status of the plan and the
amounts recognized in the financial statements for the year ended
March 31, 2001 and March 31, 2002:
-----------------------------------------------------------------------------------------
At March 31,
----------------
2001 2002
---- ----
(in Rs million)
------------------
Change in benefit obligations
Projected benefit obligations at beginning of the year/period.. - 724
Obligations assumed on acquisitions............................ 711 -
Service cost................................................... 1 26
Interest cost.................................................. 4 72
Benefits paid.................................................. - (27)
Actuarial loss on obligations.................................. 8 118
--- ---
Projected benefit obligations at the end of the period......... 724 913
Change in plan assets
Fair value of plan assets at beginning of the period........... - 795
Fair value of plan assets acquired on acquisitions............. 779 -
Expected return on plan assets................................. 1 79
Employer contributions......................................... 1 53
Gain on plan assets............................................ 14 13
Benefits paid.................................................. - (27)
--- ---
Plan assets at the end of the period........................... 795 913
--- ---
Net prepaid benefit............................................ 71 -
=== ===
-----------------------------------------------------------------------------------------
18.1.9 The components of the net pension cost are given below:
-----------------------------------------------------------------------------------------
At March 31,
----------------
2001 2002
---- ----
(in Rs million)
------------------
Service cost.................................................... 1 26
Interest cost................................................... 4 72
Expected return on assets....................................... (1) (79)
Actuarial (gain) / loss......................................... (6) 105
--- ---
Net pension cost................................................ (2) 124
=== ===
-----------------------------------------------------------------------------------------
18.1.10 Assumptions used in accounting for the pension plan are given below:
-----------------------------------------------------------------------------------------
At March 31,
----------------
2001 2002
---- ----
Discount rate................................................... 11% 10%
Rate of increase in the compensation levels..................... 8% 8%
Rate of return on plan assets................................... 10.50% 10%
-----------------------------------------------------------------------------------------
Superannuation
18.1.11 The permanent employees of ICICI Bank are entitled to receive
retirement benefits under the superannuation fund operated by ICICI
Bank. The Superannuation fund is a defined contribution plan under
which ICICI Bank contributes annually a sum equivalent to 15% of the
employee's eligible annual salary to Life Insurance Corporation of
India, the manager of the fund, that undertakes to pay the lump sum
and annuity payments pursuant to the scheme. The Bank has contributed
Rs 22 and Rs 28 million to the employees superannuation plan in year
ended March 31, 2001 and 2002 respectively.
30
Provident fund
18.1.12 In accordance with the Employees Provident Fund & Miscellaneous
Provisions Act, 1952, all employees of ICICI Bank are entitled to
receive benefits under the provident fund, a defined contribution
plan, in which, both the employee and ICICI Bank contribute monthly
at a determined rate (currently 12% of employees' salary). These
contributions are made to a fund set up by ICICI Bank and
administered by a board of trustees. Further, in the event the return
on the fund is lower than 9.5% (current guaranteed rate of return to
the employees), such difference will be contributed by ICICI Bank and
charged to income. The contribution to the employees provident fund
amounted to Rs 23 million and Rs 54 million in year ended March 31,
2001 and 2002 respectively.
Leave encashment
18.1.13 The liability for leave encashment on retirement or on termination of
services of the employee of ICICI Bank is valued on the basis of the
employee's last drawn salary and provided for. Other liabilities also
include provision of Rs 27 million on account of the leave encashment
liability of the Bank at March 31, 2002 (March 31, 2001: Rs 8
million).
18.2 Employee stock option plan
18.2.1 In February 2000, the Bank approved an employee stock option plan.
Under the plan, the Bank is authorized to issue up to 9.84 million
equity shares to its employees and the employees of the affiliate
company.
18.2.2 The options vest in a graded manner over three years with 20%, 30%
and 50% of the option vesting at the end of each year. The options
can be exercised within 10 years from the date of the grant. On April
2001, the Bank issued additional options to its employees and whole
time directors. The Bank has not recorded any compensation cost as
the exercise price was more than the quoted market price of the
underlying equity shares on the grant date. Stock option activity
18.2.3 A summary of the status of the Bank's option plan is presented below:
-------------------------------------------------------------------------------------------------------------------------
Year ended March 31, 2000 Year ended March 31, 2001 Year ended March 31, 2002
------------------------- ------------------------- -------------------------
Option Range of Option Range of Option Range of
shares exercise shares exercise shares exercise
outstanding price and outstanding price and outstanding price and
grant date grant date grant date
fair values fair values fair values
Outstanding at the beginning of
the year....................... - 1,713,000 Rs 171.90 1,636,125 Rs 171.90
Granted during the year 1,788,000 Rs 171.90 - - 1,580,200 Rs 171.00
Forfeited during the year.......... 75,000 Rs 171.90 76,875 Rs 171.90 43,500 Rs 171.00 -
Rs 171.90
Exercised during the year.......... - - -
--------- --------- ---------
Outstanding at the end of the
year............................ 1,713,000 1,636,125 3,172,825
========= ========= =========
Exercisable at the end of the year - - 322,425
-------------------------------------------------------------------------------------------------------------------------
31
18.2.4 Had compensation costs of the Bank's stock based compensation plan
been recognized based on the fair value on the grant date consistent
with the method prescribed by SFAS No 123, the Bank's net income and
earnings per share for the year ended March 31, 2002 would have been
impacted as indicated below:
----------------------------------------------------------------------
Year ended March 31
----------------------
2000 2001 2002
---- ---- ----
(in Rs millions,
except per share data)
Net income
As reported................................ 1,402 1,308 2,037
Proforma under SFAS No 123................. 1,401 1,273 1,956
Basic earnings per share:
As reported................................ 8.49 6.60 9.24
Proforma under SFAS No 123................. 8.49 6.42 8.88
Diluted earnings per share
As reported................................ 8.49 6.60 9.24
Proforma under SFAS No 123................. 8.49 6.42 8.88
----------------------------------------------------------------------
18.2.5 The effects of applying SFAS No. 123, for disclosing compensation
cost under such pronouncement may not be representative of the
effects on reported net income for future years.
18.2.6 The fair value at date of grant for options granted during fiscal
2000 and fiscal 2002 was Rs 55.78 and Rs 83.38 using the
Black-Scholes Option-pricing model. The following assumptions have
been used to fair value the options:
----------------------------------------------------------------------
Year ended March 31
----------------------
2000 2001 2002
---- ---- ----
Expected life in years..................... 3 - 3
Risk free interest rate.................... 10.35% - 9.33%
Volatility................................. 30.00% - 67.90%
Dividend yield............................. 0.70% - 1.18%
----------------------------------------------------------------------
32
19 Income taxes
19.1 Components of deferred tax balances
19.1.1 The tax effects of significant temporary differences are reflected
through a deferred tax asset/liability, which is included in the
balance sheet of ICICI Bank.
19.1.2 A listing of the temporary differences is set out below:
----------------------------------------------------------------------
At March 31,
---------------
2001 2002
---- ----
(in Rs millions)
----------------
Deferred tax assets
Allowance for loan losses........................... 824 763
Amortization of held to maturity securities......... 165 190
Amortization of trading & available for sale
securities........................................ 82 323
Deposits............................................ 141 38
Deferred loan fees.................................. 25 29
Others.............................................. 34 9
----- -----
Gross deferred tax asset............................ 1,271 1,352
Valuation allowances................................ 2 2
----- -----
Deferred tax asset.................................. 1,269 1,350
Deferred tax liabilities
Depreciation........................................ (475) (445)
Investments......................................... (77) -
Unrealized gain on securities, available for sale... (117) (584)
Amortization of debt issue costs.................... (34) (8)
Others.............................................. (36) (10)
----- -----
Total deferred tax liability........................ (739) (1,047)
----- -----
Net deferred tax asset.............................. 530 303
===== =====
----------------------------------------------------------------------
19.1.3 Management is of the opinion that the realization of the recognized
net deferred tax asset, net of valuation allowances, of Rs 1,350
million at March 31, 2002 (March 31, 2001: Rs 1,269 million) will
more likely than not be realized based on expectations as to future
taxable income.
33
19.2 Reconciliation of tax rates
19.2.1 The following is the reconciliation of estimated income taxes at
Indian statutory income tax rate to income tax expense as reported.
The Indian statutory tax rate is 35% plus a surcharge. For the year
ended March 31, 2000, the surcharge was 10%, resulting in a total
statutory tax rate of 38.50%. During fiscal 2001, the surcharge was
changed to 13% effective April 1, 2000, which resulted in a total
statutory tax rate of 39.55% for the year ended March 31, 2001.
During fiscal 2002, the surcharge was changed to 2% effective April
1, 2001, which resulted in a total statutory tax rate of 35.70% for
the year ended March 31, 2002.
----------------------------------------------------------------------
Year ended March 31,
----------------------------
2000 2001 2002
---- ---- ----
(in Rs millions)
----------------
Net income before taxes..................1,781 1,566 2,952
Statutory tax rate....................... 38.5% 39.55% 35.7%
Income tax expense at statutory tax rate. 686 619 1,054
Increase (reductions) in taxes on
account of
Income exempt from taxes................. (340) (344) (213)
Amortization of goodwill................. - 6 81
Effect of change in statutory tax rate... 6 - 26
Others................................... 27 (23) (17)
----- ----- -----
Reported income tax expense.............. 379 258 931
===== ===== =====
----------------------------------------------------------------------
19.3 Components of income tax expense
19.3.1 The components of income tax expense/(benefit) are set out below:
----------------------------------------------------------------------
Year ended March 31,
----------------------------
2000 2001 2002
---- ---- ----
(in Rs millions)
----------------
Current.................................. 266 700 1,171
Deferred................................. 113 (442) (240)
----- ----- -----
Total income tax expense................. 379 258 931
===== ===== =====
----------------------------------------------------------------------
20 Commitments and contingencies
Loan commitments
20.1.1 ICICI Bank has outstanding undrawn commitments to provide loans and
financing to customers. These loan commitments aggregated Rs 27,693
million and Rs 13,690 million at March 31, 2001 and March 31, 2002
respectively. The interest rate on these commitments is dependent on
the lending rates on the date of the loan disbursement. Further, the
commitments have fixed expiry dates and may be contingent upon the
borrowers ability to maintain specific credit standards.
34
Guarantees
20.1.2 As a part of its commercial banking activities, ICICI Bank has issued
guarantees to enhance the credit standing of its customers. These
generally represent irrevocable assurances that ICICI Bank will make
payments in the event that the customer fails to fulfill his
financial or performance obligations. Financial guarantees are
obligations to pay a third party beneficiary where a customer fails
to make payment towards a specified financial obligation. Performance
guarantees are obligations to pay a third party beneficiary where a
customer fails to perform a non-financial contractual obligation. The
guarantees are generally for a period not exceeding 18 months.
20.1.3 The credit risk associated with these products, as well as the
operating risks, are similar to those relating to other types of
financial instruments. Fees are recognized over the term of the
instruments.
20.1.4 Details of facilities outstanding are set out below:
----------------------------------------------------------------------
At March 31,
---------------
2001 2002
---- ----
(in Rs millions)
----------------
Financial guarantees........................ 7,511 12,551
Performance guarantees...................... 5,949 8,565
------ ------
Total ...................................... 13,460 21,116
====== ======
----------------------------------------------------------------------
Lease commitments
20.1.5 ICICI Bank has commitments under long-term operating leases
principally for premises. Lease terms for premises generally cover
periods of nine years. The following is a summary of future minimum
lease rental commitments for non-cancelable leases.
----------------------------------------------------------------------
At March 31,
(in Rs millions)
----------------
2003........................................ 174
2004........................................ 180
2005........................................ 183
2006........................................ 190
2007........................................ 197
Thereafter.................................. 630
-------
Total minimum lease commitments............. 1,554
----------------------------------------------------------------------
20.1.6 Various related legal proceedings are pending against ICICI Bank.
Potential liabilities, if any, have been adequately provided for, and
management does not estimate any incremental liability in respect of
legal proceedings.
20.1.7 Further, ICICI Bank is obligated under a number of capital contracts.
Capital contracts are job orders of a capital nature which have been
committed. Estimated amounts of contracts remaining to be executed on
capital account aggregated to Rs 93 million at March 31, 2002 (March
31, 2001: Rs 60 million).
35
21 Related party transactions
21.1.1 ICICI Bank has entered into transactions with the following related
parties:
o Affiliates of the Bank (including ICICI Limited (former parent
company));
o Employees Provident Fund Trust; and
o Directors and employees of the group.
21.1.2 The related party transactions can be categorized as follows:
Banking services
21.1.3 ICICI Bank provides banking services to all the related parties on
the same terms that are offered to other customers.
21.1.4 The revenues earned from these related parties are set out below:
----------------------------------------------------------------------
Year ended March 31,
--------------------
2001 2002
---- ----
(in Rs million)
---------------
ICICI limited (former parent company)....... 45 29
Other affiliates(1)......................... 27 4
--- ---
Total....................................... 72 33
=== ===
----------------------------------------------------------------------
(1) Comprising ICICI securities and Finance Company Limited, ICICI
Brokerage Services Limited, ICICI Capital Services Limited,
Prudential ICICI Asset Management Company Limited and ICICI Venture
Funds Management Company Limited, ICICI Personal Financial Services
Limited, ICICI Home Finance Limited, Prudential ICICI Life Insurance
Company Limited.
21.1.5 ICICI Bank has paid to the related parties interest on deposits and
borrowings in call money markets amounting to Rs 268 million for the
year ended March 31, 2002 (March 31, 2001: Rs 392 million).
21.1.6 ICICI Bank paid brokerage to ICICI Brokerage Services Limited
amounting to Rs Nil for the year ended March 31, 2002 (March 31,
2001: Rs 1 million).
Leasing of premises and infrastructural facilities
21.1.7 ICICI Bank has entered into lease agreements with ICICI Limited for
lease of certain premises and infrastructural facilities to ICICI
Bank. Net amount incurred, as rent for the year ended March 31, 2002
is Rs 207 million (March 31, 2001: Rs 177 million). Similarly, ICICI
Bank paid Rs 38 million for the year ended March 31, 2002 (March 31,
2001: Rs 16 million) towards lease rentals on certain equipment
leased from ICICI limited.
Acquisition of Equipment
21.1.8 ICICI Bank purchased equipment from ICICI Limited and ICICI Infotech
Services Limited for Rs 11 million during the year ended March 31,
2002.
36
Forward Contracts
21.1.9 ICICI Bank enters into foreign exchange forward contracts with ICICI
Limited. The outstanding contracts as at March 31, 2002 in respect of
the forward contracts amounted to Rs 251 million (March 31, 2001: Rs
2,262 million).
Derivative transactions
21.1.10 ICICI Bank enters into foreign exchange currency swaps and interest
rate swaps with ICICI Limited on a back to back basis. The
outstanding contracts as at March 31, 2002 in respect of cross
currency swaps amounted to Rs 2,272 million (Rs 4,352 million at
March 31, 2001) and in respect of interest rate swap contracts
amounted to Rs 2,710 million (Rs Nil at March 31, 2001). Similarly,
the Bank also enters into interest rate swap with the affiliates on a
back to back basis. The outstanding contracts with other affiliates
at March 31, 2002 in respect of interest rate swaps amounted to Rs
6,050 million (March 31, 2001: Rs 2,900 million). The interest paid
in respect of swaps with ICICI amounts to Rs 275 million (March 31,
2001: Rs 189 million) Investments in pass through certificates
21.1.11 During the year ICICI Bank Limited invested in certain securities
issued by trusts formed by its affiliate ICICI Limited. The repayment
of principal amount of certificates and periodical interests at
predetermined rates are from the underlying securities held by the
trusts transferred to it by ICICI limited. The total investments in
PTCs outstanding at March 31, 2002 was Rs 9,112 million (March 31,
2001 Rs Nil)
Repurchase transactions
21.1.12 The Bank entered into repurchase transactions with ICICI Limited
during the year. The amount of such transactions outstanding as at
March 31, 2002 was Rs 21,399 million (March 31, 2001:
Rs Nil)
Expenses for services rendered
21.1.13 ICICI Bank incurred Rs 12 million and Rs 43 million for the year
ended March 31, 2002 (March 31, 2001: Rs 4 million) to ICICI limited
and ICICI Personal Finances Limited respectively for secondment of
their employees.
Receipts for services rendered
21.1.14 ICICI Bank received Rs 8 million for the year ended March 31, 2002
(March 31, 2001: Rs 5 million) from ICICI limited and ICICI Personal
Financial Services Limited for employees seconded to them.
Share transfer activities
21.1.15 ICICI Bank has paid Rs 1 million for the year ended March 31, 2002
(March 31, 2001: Rs 3 million) to ICICI Infotech Services Limited for
share transfer services provided by them. The Bank incurred Rs 2
million for the year ended March 31, 2002 for DEMAT services provided
by the above affiliate (March 31, 2001 Rs 5 million).
37
Dividend payments
21.1.16 ICICI Bank declared and paid Rs 407 million as dividend to its
affiliates for the year ended March 31, 2002 (March 31, 2001: Rs 184
million)
Other transaction with related parties
21.1.17 ICICI Bank has advanced concessional loans to employees, bearing
interest ranging from 3.5% to 6%. These are housing, vehicle and
general purpose loans. The tenure of these loans ranges from five to
twenty years. The balance outstanding on account of all the staff
loans at March 31, 2002 was Rs 865 million (March 31, 2001 Rs 494
million).
21.1.18 ICICI Bank has entered into an agreement with ICICI Personal
Financial Services Limited for telephone banking call centre services
and transaction processing services for the credit card related
activities. The amount incurred for the year ended March 31, 2002 for
these services was Rs 149 million (March 31, 2001: Rs 99 million).
21.1.19 ICICI Limited had undertaken a corporate brand building advertising
campaign of which ICICI Bank's share amounts to Rs 29 million for the
year ended March 31, 2002 (March 31, 2001: Rs 15 million).
21.1.20 ICICI Limited has set up common technology infrastructure set up for
utilization by the ICICI Group. The amount incurred by ICICI Bank as
its share amounted to Rs 37 million (March 31, 2001: Rs 34 million)
and Rs 35 million (March 31, 2001: Rs 11 million) towards shares of
communication expenses and share of backbone infrastructure expense
for the year ended March 31, 2002. Similarly, it incurred Rs 124
million for the year ended March 31, 2002 (March 31, 2001: Rs 74
million), as expenses towards development software and providing
support services for the software and hardware by ICICI Infotech
Services Limited.
21.1.21 ICICI Bank has incurred an amount of Rs 110 million for the year
ended March 31, 2002 (March 31, 2001: Rs 49 million) towards its
share of the operating costs of the common data centre set up by
ICICI Limited.
21.1.22 ICICI Bank hired the services of ICICI Capital Services Limited for
setting up of ATMs at various places for which Rs 7 million (March
31, 2001: Rs 8 million) were incurred for the above services during
the year ended March 31, 2002. The Bank has paid Rs 9 million during
the year ended March 31, 2002 (March 31, 2001: Rs Nil) to ICICI
e-Payments Limited towards the payment gateway services rendered to
internet merchants acquired by the Bank. The Bank also paid Rs 10
million (March 31, 2001: Rs Nil) to ICICI Web Trade Limited for
compilation of data on new accounts acquired by the Bank during the
year ended March 31, 2002.
21.1.23 The balances pertaining to receivables from and payable to related
parties are as follows:
----------------------------------------------------------------------
ICICI Other
Limited Affiliates(1)
(in Rs million)
------------------------
At March 31, 2001
Accounts receivable......................... 38 17
Accounts payable............................ 5,209 2,847
At March 31, 2002
Accounts receivable......................... 24 1
Accounts payable............................ 4,680 893
----------------------------------------------------------------------
Note: 1) Comprises ICICI securities and Finance Company Limited,
Prudential ICICI Asset Management Company Limited,
Prudential ICICI Trust Limited, ICICI Infotech Services
Limited, ICICI Brokerage Services
38
Limited, ICICI Personal Financial Services Limited, ICICI
Capital Services Limited, ICICI Venture Funds Management
Company Limited, ICICI Properties Limited and ICICI Home
Finance Company Limited, ICICI Real Estate Company Limited,
Traveljini.com Private Limited, ICICI Knowledge Park
Limited, ICICI Realty Limited, ICICI Web Trade Limited,
ICICI e-Payments Limited, Prudential ICICI Life Insurance
Company Limited.
22 Estimated fair value of financial instruments
22.1.1 ICICI Bank's financial instruments include financial assets and
liabilities recorded on the balance sheet.
22.1.2 Fair values vary from period to period based on changes in a wide
range of factors, including interest rates, credit quality, and
market perception of value and as existing assets and liabilities run
off and new items are generated. Fair value estimates are generally
subjective in nature and are made as of a specific point in time
based on the characteristic of the financial instruments and relevant
market information.
22.1.3 The data reported below represents management's best estimates based
on a range of methodologies and assumptions. Where available, quoted
market prices are used. In other cases, fair values are based on
estimates using present value or other valuation techniques. These
techniques involve uncertainties and are significantly affected by
the assumptions used and judgements made regarding risk
characteristics of various financial instruments, discount rates,
estimates of future cash flows, future estimated loss experience and
other factors. Changes in assumptions could significantly affect
these estimates and the resulting fair values. Further, the fair
values are estimated based on the existing financial instruments
without attempting to estimate the value of anticipated future
business.
22.1.4 Disclosure of fair values is not required for certain items such as
premise and equipment, prepaid expenses, credit card receivables,
obligations for pension and other postretirement benefits and other
intangible assets. Accordingly, the aggregate fair value of amounts
do not purport to represent the underlying "market" or franchise
value of the Bank. Further, because of the differences in assumptions
used and methodologies the fair values reported below may not be
strictly comparable with those of other Banks.
22.1.5 A listing of the fair values by category of financial assets and
financial liabilities is set out below:
------------------------------------------------------------------------------------------------------------
Particulars Carrying value Estimated fair Carrying value Estimated
value fair value
At March 31, 2001 At March 31, 2002
------------------------------- ---------------------------
(in Rs millions)
-------------------------------------------------------------
Financial assets
Securities, available for sale.............. 24,787 24,787 155,758 155,758
Securities, held to maturity................ 10,944 11,524 24,294 28,768
Trading assets (including derivatives)...... 18,725 18,725 26,075 26,075
Loans (Note 1).............................. 93,030 93,128 72,474 72,681
Other financial assets (Note 2)............. 62,704 62,704 112,049 112,049
------- ------- ------- -------
Total....................................... 210,190 210,868 390,650 395,331
======= ======= ======= =======
Financial liabilities
Interest-bearing deposits................... 137,883 138,846 295,647 296,385
Non-interest-bearing deposits............... 26,371 26,371 29,574 29,574
Short term borrowings....................... 3,012 3,012 1,409 1,409
Trading liabilities (including derivatives). 5,958 5,958 1,237 1,237
Long-term debt.............................. 2,421 2,594 5,740 5,906
Other financial liabilities (Note 3)........ 18,236 18,236 42,272 42,272
------- ------- ------- -------
Total....................................... 193,881 195,017 375,879 376,783
======= ======= ======= =======
------------------------------------------------------------------------------------------------------------
Note 1: The carrying value of loans is net of allowance for loan
losses and unearned income.
39
Note 2: Includes cash, due from banks, deposits at interest with
banks, reverse repurchase short-term highly liquid securities,
and customers acceptance liability for which the carrying
value is a reasonable estimate of fair value.
Note 3: Represents acceptances and other liabilities outstanding,
for which the carrying value is a reasonable estimate of the
fair value.
22.1.6 The carrying value of cash and cash equivalents as reported in the
balance sheet approximates the fair values since maturities are less
than 90 days. Trading account assets and liabilities are carried at
fair values in the balance sheet. Fair values of securities in all
categories are based on quoted or independent market prices. The fair
value of certain long-term are estimated by discounting the
contractual cash flows using interest rates currently being offered
for loans with similar terms to borrowers of similar credit quality.
The carrying value of certain other loans approximates fair value due
to the short-term and/or frequent repricing characteristics of these
loans. For impaired loans where the credit quality of the borrower
has deteriorated, fair values are estimated by discounting expected
cash flows at a rate commensurate with the associated risk.
22.1.7 For liabilities, market borrowing rates of interest of similar
instruments are used to discount contractual cash flows. The
estimated fair value interest-bearing deposits and long term debt
reflects changes in market rates since the time these were sourced.
23 Future impact of new accounting standards
Business combination, goodwill and other intangible assets
23.1.1 In June 2001, the Financial Accounting Standards Board ('FASB')
issued SFAS 141, Business Combinations and SFAS 142, Goodwill and
Other Intangible Assets. SFAS 141 require that all business
combinations be accounted for under a single method-the purchased
method. Use of the pooling-of-interest method is no longer permitted
and is effective for business combinations initiated after June 30,
2001. SFAS 142 requires that goodwill no longer be amortized to
earnings, but instead be reviewed for impairment and is effective for
fiscal years beginning after December 15, 2001, with earlier
application permitted in certain instances.
23.1.2 The proposed merger of ICICI Limited with ICICI Bank will be
accounted for under SFAS 141, goodwill and other intangibles will be
accounted for in accordance with SFAS 142.
23.1.3 In August 2001, the FASB, issued SFAS 143, Accounting for Asset
Retirement Obligations. SFAS 143 requires entities to record the fair
value of a liability for an asset retirement obligation in the period
in which it is incurred. When the liability is initially recorded,
the entity capitalizes a cost by increasing the carrying amount of
the related long-lived asset. Over time, the liability is accreted to
its present value each period, and the capitalized cost is
depreciated over the useful life of the related asset. Upon
settlement of the liability, an entity either settles the obligation
for its recorded amount or incurs a gain or loss upon settlement. The
standard is effective for fiscal years beginning after June 15, 2002,
with earlier application encouraged.
23.1.4 In August 2001, the FASB also issued SFAS 144, Accounting for the
impairment of Disposal of Long-Lived Assets. SFAS144 requires that
those long-lived assets be measured at the lower of carrying amount
or fair value less cost to sell, whether reported in continuing
operations or in discontinued operations. Under this standard,
discontinued operations will no longer be measured at net realizable
value or include amounts for operating losses that have not yet
occurred. The provisions of SFAS 144 are effective for financial
statements issued for fiscal years beginning after December 15, 2001
and, generally, are to be applied prospectively. Early application is
encouraged.
40
23.1.5 Adoption of SFAS 143 and 144, is not estimated to have a significant
impact on the financial statements of the Bank.
23.1.6 The provisions of the new standard are generally to be applied
prospectively.
------------------------------- ---------------------------------
G. Venkatakrishnan Balaji Swaminathan
Senior Executive Vice President Chief Financial Officer
---------------------------------
Kalpana Morparia
Executive Director
41