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  • 1. MINOR PROJECT REPORT ON THE STUDY OF ANALYSIS OF FINANCIAL STATEMENT OF ICICI BANKSubmitted in the partial fulfillment of required for the award of degree of Bachelor of Business Administration. Submitted By: Akanksha Jain ENROLL No- 001 /KRCHE /BBA(B&I)/2006 Under the guidance (MR. A. Lenin Jothi) ( Mrs. Madhu Arora)KASTURI RAM COLLEGE OF HIGHER EDUCATION (AFFILATED TO GURU GOBIND SINGH UNIVERSITY, DELHI)
  • 2. ACKNOWLEDGEMENTGetting a project ready requires the work and effort of many people. Iwould like to pay my sincere gratitude and thanks to those people, whodirected me at every step in this project work. The present report is basedon “ ANALYSIS OF FINANCIAL STATEMENT- CASE STUDY OFICICI BANK”.I extended my sincere thank and gratitude to Mrs. Madhu Arora,internal faculty, for her help and valuable support throughout theterm of the project. It was a learning experience to work under herguidance.I am also very thankful to Mr. A. Lenin Jothi who has given me theopportunity to do this project report. I am also thankful to myparents, all my friends and other sources who gave me their muchneeded support and inspiration in preparing this project report. (AKANKSHA JAIN)
  • 3. CERTIFICATEThis is to certify that “Ms. Akanksha Jain” has accomplished the projecttitled “ANALYSIS OF FINANCIAL STATEMENT- CASE STUDY OFICICI BANK” under my guidance and supervision.She has submitted this project in the partial fulfillment for the awardof degree of Bachelor of Business Administration (B.B.A[B&I]) fromGuru Gobind Singh Indraprastha University.The work has not been anywhere else for the award of degree. All sourceof information have been duly mentioned.Mrs. Madhu Arora(Lecturer)(Kasturi Ram College Of Higher Education)
  • 4. CONTENT PAGE NO.1. INTRODUCTION 1-25 1.1 A Brief Introduction 2 1.2Objectives 2 1.3ICICI Bank 3 1.3.1 History 4 1.3.2 Board of Directors 5 1.3.3 Board Committees 6 1.3.4 Organisational Structure 7 1.3.5 Products & Services 12 1.3.6 Risk Aspects 18 1.3.7 Subsidiary companies 21 1.3.8 Key Group Companies 22 1.3.9 Public Recognition 242. FINANCIAL STATEMENT AND IT’S ANALYSIS 26-44 2.1 Study of Profit & Loss A/C 27 2.2 Study of Balance-Sheet 28 2.3 Study of cash flow statement 38 2.3 Financial Statement Analysis 403. ANALYSIS OF FINANCIAL STATEMENT OF ICICI BANK 45-61 3.1 Management Discussion & Analysis 46 3.2 Comparative Income Statement 53 3.3 Comparative Financial Position Statement 55 3.4 Ratio Analysis- Financial Statement 57 3.5 Cash Flow Statement 604. CONCLUSION 62-645. RECOMMENDATION & SUGGESTION 65-66 BIBLIOGRAPHY 67 ANNEXURE 68-70
  • 5. Profit & Loss Account 69Balance-Sheet CHAPTER-1 INTRODUCTION
  • 6. 1.1 A BRIEF INTRODUCTIONIn any organization, the two important financial statements are the Balancesheet & Profit and loss account of the business. Balance sheet is astatement of the financial position of an enterprise at a particular point oftime. Profit and loss account shows the net profit or net loss of a companyfor a specified period of time. When these statements of the last few year ofany organization are studied and analyzed, significant conclusions may bearrived regarding the changes in the financial position, the important policiesfollowed and trends in profit and loss etc. Analysis and interpretation of thefinancial statement has now become an important technique of creditappraisal. The investors, financial experts, management executives and thebankers all analyze these statements. Though the basic technique ofappraisal remains the same in all the cases but the approach and theemphasis in analysis vary. A banker interprets the financial statement so asto evaluate the financial soundness and stability, the liquidity position andthe profitability or the earning capacity of borrowing concern. Analysis offinancial statement is necessary because it help in depicting the financialposition on the basis of past and current records. Analysis of financialstatement help in making the future decision and strategies. Therefore, it isvery necessary for every organization whether it is a financial ormanufacturing etc. to make financial statement and to analyse it.1.2 OBJECTIVEThe main objective of this report are the following:
  • 7.  To study about ICICI BANK and its related aspects like its products & services, history, organizational structure, subsidiary companies etc.  To analyse the financial statement i.e P&L account and Balance sheet of ICICI BANK.  To learn about P&L Account, Balance-sheet and different type of Assets& Liabilities.  To understanding the meaning and need of Balance Sheet and profit and loss account.  The purpose is to portray the financial position of ICICI BANK with the help of balance sheet and profit and loss account.  To evaluate the financial soundness ,stability and liquidity of ICICI BANK.1.3 ICICI BANKICICI Bank is India’s second-largest bank with total assets of Rs.3,446.58 billion (US$ 79 billion) at March 31, 2007 and profit after taxof Rs. 31.10 billion for fiscal 2007. ICICI Bank is the most valuablebank in India in terms of market capitalization and is ranked thirdamongst all the companies listed on the Indian stock exchanges. In terms offree float market capitalization*. The Bank has a network of about 950branches and 3,300 ATMs in India and presence in 17 countries. ICICIBank offers a wide range of banking products and financial services tocorporate and retail customer through a variety of delivery channelsand through its specialized subsidiaries and affiliates in the areas ofinvestment banking, life and non-life insurance, venture capital and
  • 8. asset management. The Bank currently has subsidiaries in the UnitedKingdom, Russia and Canada, branches in Singapore, Bahrain, HongKong, Sri Lanka and Dubai International Finance Center andrepresentative offices in the United States, United Arab Emirates,China, South Africa, Bangladesh, Thailand, Malaysia and Indonesia.UK subsidiary has established a branch in Belgium.ICICI Banks equity shares are listed in India on Bombay Stock Exchange(BSE) and the National Stock Exchange (NSE) of India Limited and itsAmerican Depositary Receipts (ADRs) are listed on the New York Stock Exchange(NYSE).1.3.1HISTORYICICI Bank was originally promoted in 1994 by ICICI Limited, an Indianfinancial institution, and was its wholly owned subsidiary. ICICIsshareholding in ICICI Bank was reduced to 46% through a public offering ofshares in India in fiscal 1998, an equity offering in the form of ADRs listedon the NYSE in fiscal 2000, ICICI Banks acquisition of Bank of MaduraLimited in an all-stock amalgamation in fiscal 2001, and secondary marketsales by ICICI to institutional investors in fiscal 2001 and fiscal 2002. ICICIwas formed in 1955 at the initiative of the World Bank, the Government ofIndia and representatives of Indian industry. The principal objective was tocreate a development financial institution for providing medium-term andlong-term project financing to Indian businesses. In the 1990s, ICICItransformed its business from a development financial institution offeringonly project finance to a diversified financial services group offering a widevariety of products and services, both directly and through a number ofsubsidiaries and affiliates like ICICI Bank. In 1999, ICICI become the first
  • 9. Indian company and the first bank or financial institution from non-JapanAsia to be listed on the NYSE.After consideration of various corporate structuring alternatives in thecontext of the emerging competitive scenario in the Indian banking industry,and the move towards universal banking, the managements of ICICI andICICI Bank formed the view that the merger of ICICI with ICICI Bankwould be the optimal strategic alternative for both entities, and would createthe optimal legal structure for the ICICI groups universal banking strategy.The merger would enhance value for ICICI shareholders through the mergedentitys access to low-cost deposits, greater opportunities for earning fee-based income and the ability to participate in the payments system andprovide transaction-banking services. The merger would enhance value forICICI Bank shareholders through a large capital base and scale ofoperations, seamless access to ICICIs strong corporate relationships built upover five decades, entry into new business segments, higher market share invarious business segments, particularly fee-based services, and access to thevast talent pool of ICICI and its subsidiaries. In October 2001, the Boards ofDirectors of ICICI and ICICI Bank approved the merger of ICICI and two ofits wholly-owned retail finance subsidiaries, ICICI Personal FinancialServices Limited and ICICI Capital Services Limited, with ICICI Bank. Themerger was approved by shareholders of ICICI and ICICI Bank in January2002, by the High Citst of Gujarat at Ahmedabad in March 2002, and by theHigh Citst of Judicature at Mumbai and the Reserve Bank of India in April2002. Consequent to the merger, the ICICI groups financing and bankingoperations, both wholesale and retail, have been integrated in a single entity.
  • 10. ICICI Bank has formulated a Code of Business Conduct and Ethics for itsdirectors and employees.1.3.2 BOARD OF DIRECTORS  MR. N.Vaghul (CHAIRMAN)  MR. Sridar Iyengar  MR. Lakshmi N. Mittal  MR. Narendra Murkumbi  MR. Anupam Puri  MR. Vinod Rai  MR. M. K. Sharma  MR. P.M. Sinha  Prof. Marti G. Subrahmanyam  MR. T. S. Vijayan  MR. V. Prem Wasta  MR. K. V. Kamath (MANAGING DIRECTOR & CEO)  MR. Chanda Kochhar (JOINT MANAGING DIRECTOR)  MR. Nachiket Mor (DEPUTY MANAGING DIRECTOR)  MR. V. Vaidyanathan, (EXECUTIVE DIRECTOR)  MR. Sonjoy Chatterjee (EXECUTIVE DIRECTOR)1.3.3 BOARD COMMITTEES
  • 11. Audit Committee Board Governance & Mr. Sridar Iyengar Remuneration Committee Mr. Narendra Murkumbi Mr. N. Vaghul Mr. M. K. Sharma Mr. Anupam Puri Mr. M. K. Sharma Mr. P. M. SinhaCustomer Service Committee Prof. Marti G. Subrahmanyam Mr. N. Vaghul Mr. Narendra Murkumbi Credit Committee Mr. M.K. Sharma Mr. P.M. Sinha Mr. N. Vaghul Mr. K. V. Kamath Mr. Narendra Murkumbi Mr. M .K. Sharma Mr. P. M. SinhaFraud Monitoring Committee Mr. K. V. Kamath Mr. M. K. Sharma Mr. Narendra Murkumbi Risk Committee Mr. K. V. Kamath Mr. N. Vaghul Ms. Chanda D. Kochhar Mr. Sridar Iyengar Mr. V. Vaidyanathan Prof. Marti G. Subrahmanyam Mr. V. Prem Watsa Mr. K. V. Kamath Share Transfer & Shareholders/ Investors Asset-Liability Management Grievance Committee Committee Mr. M. K. Sharma Ms. Chanda D. Kochhar Mr. Narendra Murkumbi Dr. Nachiket Mor Ms. Chanda D. Kochhar Ms. Madhabi Puri-Buch Ms. Madhabi Puri-Buch Mr. V. Vaidyanathan Committee of Directors - Mr. K. V. Kamath Ms. Chanda D. Kochhar Dr. Nachiket Mor Ms. Madhabi Puri-Buch Mr. V. Vaidyanathan
  • 12. 1.3.4 ORGANISATIONAL STRUCTURE OF ICICIBANKICICI Bank’s organisation structure is designed to be flexible and customer-focused, while seeking to ensure effective control and supervision andconsistency in standards across the organisation and align all areas ofoperations to overall organisational objectives. The organisation structure isdivided into six principal groups – Retail Banking, Wholesale Banking,International Banking, Rural (Micro-Banking) and AgricultureBanking, Government Banking and Corporate Center.RETAIL BANKINGThe Retail Banking Group is responsible for products and services forretail customers and small enterprises including various creditproducts, liability products, distribution of third party investment andinsurance products and transaction banking services.WHOLESALE BANKINGThe Wholesale Banking Group is responsible for products and servicesfor large and medium-sized corporate clients, including credit andtreasury products, investment banking, project finance, structuredfinance and transaction banking services.INTERNATIONAL BANKINGThe International Banking Group is responsible for its internationaloperations, including operations in various overseas markets as well as
  • 13. its products and services for non-resident Indians and its internationaltrade finance and correspondent banking relationships.RURAL AND AGRICULTURAL BANKINGThe Rural, Micro-Banking & Agri-Business Group is responsible forenvisioning and implementing rural banking strategy, includingagricultural banking and micro-finance.GOVERNMENT BANKINGThe Government Banking Group is responsible for government bankinginitiatives.CORPORATE CENTERThe Corporate Center comprises the internal control environment functions(including operations, risk management, compliance, audit and legal);finance (including financial reporting, planning and strategy, asset liabilitymanagement, investor relations and corporate communications); humanresitsces management; and facilities management & administration.
  • 14. BUSINESS REVIEWDuring fiscal 2007, the Bank continued to grow and diversify its asset baseand revenue streams by leveraging the growth platforms created over thepast few years. It maintained its leadership position in retail credit, achievedrobust growth in its fee income from both corporate and retail customers,grew its deposit base and significantly scaled up its international operationsand rural reach.RETAIL BANKINGICICI is the largest provider of retail credit in India. ICICI’s total retaildisbursements in fiscal 2007 were approximately Rs. 777.00 billion,compared to approximately Rs. 627.00 billion in fiscal 2006. It’s totalretail portfolio increased from Rs. 921.98 billion at March 31, 2006 toRs. 1,277.03 billion at March 31, 2007, constituting 65% of it’s totalloans at that date. It continued its focus on retail deposits to create astable funding base. At March 31, 2007 it had more than 25 millionretail customer accounts.During fiscal 2007, it expanded its branch network. At March 31, 2007,it had 755 branches and extension counters compared to 614 branchesand extension counters at March 31, 2006. Pursuant to theamalgamation of The Sangli Bank Limited with it effective April 19,2007, it acquired over 190additional branches and extension counters. Itcontinued to expand its electronic channels, namely internet banking,mobile banking, call centres, point of sale terminals and ATMs, andmigrate customer transaction volumes to these channels. During fiscal
  • 15. 2007, over 80% of customer induced transactions took place throughthese electronic channels. It increased its ATM network to 3,271 ATMs.SMALL AND MEDIUM ENTERPRISESIn this segment it’s strategy has been focused around customerconvenience in transaction banking services, and working capital loansto suppliers or dealers of large corporations and clusters of smallenterprises that have a homogeneous profile. During fiscal 2007, it’scustomer base increased by more than 50% to over 900,000 transactionbanking customers. These customers are serviced by over 580 branchesof the Bank, covering over 200 locations. During fiscal 2007, theEmerging India Award entered in the Limca Book of Records as thebiggest business award in India.CORPORATE BANKINGIt’s corporate banking strategy is based on providing comprehensive andcustomized financial solutions to its corporate customers. It offer a completerange of corporate banking products including rupee and foreign currencydebt, working capital credit, structured financing, syndication andtransaction banking products and services.Fiscal 2007 saw continuing demand for credit from the corporate sector,with growth and additional investment demand in almost all sectors. It isnow a preferred partner for Indian companies for syndication of externalcommercial borrowings and other fund raising in international markets.
  • 16. RURAL BANKINGIt’s rural strategy is based on enhancing value at every level of the supplychain in all important farm and non-farm sectors. Towards this end, it offer arange of financial products and services that cater to the rural masses in allthe important sectors like infrastructure, horticulture, food processing, dairy,poultry, seeds, fertiliser and agrochemical industries. Customised financialsolutions are offered to individual customers, agri small & mediumenterprises, agri corporates and members of their supply chains. On the ruralretail side, the Bank offers crop loans, farm equipment financing,commodity-based loans, working capital loans for agri-enterprises,microfinance loans, jewel loans as well as savings, investment and insuranceproducts. In addition bank is introducing products like rural housing financeto cater to the needs of rural customers. During fiscal 2007, it introducedloans to rural educational institutions for expansion of their have developed a hybrid distribution channel strategy, a combination of branch and non-branch channels (credit access points). Ithas embarked on a “no white spaces” strategy wherein it aim to setup an ICICI Bank touch point within 10 km of any customer. Theamalgamation of Sangli Bank would extend its outreach in rural areas. During fiscal 2007, a provision of Rs. 0.9 billion (USS$ 22million) was made on account of identified frauds in warehouse receipt financing business of agricultural credit.INTERNATIONAL BANKINGICICI Bank has established a strong franchise among non-residentIndians (NRI). It has established strong customer relationships byoffering a comprehensive product suite, technology-enabled access foroverseas customers, a wide distribution network in India and allianceswith local banks in various markets. It has over 450,000 NRI customers.It has undertaken significant brand-building initiatives in internationalmarkets and have emerged as a well-recognised financial services brandfor NRIs. It’s market share in inward remittances into India has
  • 17. increased to over 25%. It has consolidated it’s global remittanceinitiative, targeting non-Indian communities, by leveraging it’s corecapabilities of technology-based service delivery. A large number ofremittance products were introduced to complement the existing suite ofproducts. The business focus has been on rolling out successful productsacross multiple geographies and getting into high volume correspondentarrangements.1.3.5 PRODUCTS AND SERVICESBANKING ACCOUNTSICICI Bank offers a wide range of banking accounts such as Current, Saving, Life Plus Senior, Recurring Deposit, Young Stars,Salary Account etc. tailor-made for every customer segments, from children to senior citizens. Convenience and ease to access are thebenefits of ICICI Bank accounts.  YOUNG STARS ACCOUNT A special portal for children to learn banking basics, manage personal finances and have a lot of fun.  BANK@CAMPUS This student banking services gives students access to their account details at the click of a mouse. Plus, the student gets a chequebook, debit card and annual statements.  SAVINGS ACCOUNTS Convenience is the name of the game with ICICI bank’s savings account. whether it is an ATM/debit card, easy withdrawal, easy loan options or internet banking, ICICI bank’s saving account always keep you in touch of money.  FIXED DEPOSITS
  • 18. ICICI Bank offers a range of deposit solutions to meet varying needs at every stage of life. It offers a range of tenures and other features to suit all requirements.INSURANCEThe ICICI group offers a range of insurance products to cover varying needs ranging from life, pensions and health, to home, motorand travel insurance. The products are made accessible to customers through a wide network of advisors, banking partners,Corporate agents and brokers with the added convenience of being able to buy online.  LIFE INSURANCE The ICICI group provides the many life insurance product through ICICI Prudential Life Insurance Company.  GENERAL INSURANCE The ICICI group provides the many general insurance products like motor, travel and home insurance through ICICI Lombard General Insurance Company.LOANSICICI bank offers a range of deposits solutions to meet varying needs atevery stage of life. It offers a range of tenures and other features to suit allrequirements.  HOME LOAN The No. 1 Home Loans Provider in the country, ICICI Bank Home Loans offers some unbeatable benefits to its customers -
  • 19. Doorstep Service, Simplified Documentation and Guidance throughout the Process. Its really easy !  PERSONAL LOAN ICICI Bank Personal Loans are easy to get and absolutely hassle free. With minimum documentation you can now secure a loan for an amount upto Rs. 15 lakhs.  VEHICLE LOANS The No. 1 financier for car loans in the country. Network of more than 2500 channel partners in over 1000 locations. Tie-ups with all leading automobile manufacturers to ensure the best deals. Flexible schemes & quick processing are the main advantages are here. Avail attractive schemes at competitive interest rates from the No 1 Financier for Two Wheeler Loans in the country . Finance facility upto 90% of the On Road Cost of the vehicle, repayable in convenient repayment options and comfortable tenors from 6 months to 36 monthsCARDSICICI Bank offers a variety of cards to suit different transactionalneeds. Its range includes Credit Cards, Debit Cards and Prepaid cards.These cards offer you convenience for financial transactions like cashwithdrawal, shopping and travel. These cards are widely accepted bothin India and abroad.  CREDIT CARD ICICI Bank Credit Cards give you the facility of cash, convenience and a range of benefits, anywhere in the world. These benefits range from life time free cards, Insurance benefits, global
  • 20. emergency assistance service, discounts, utility payments, travel discounts and much more.  DEBIT CARD The ICICI Bank Debit Card is a revolutionary form of cash that allows customers to access their bank account around the clock, around the world. The ICICI Bank Debit Card can be used for shopping at more than 3.5 Lakh merchants in India and 24 million merchants worldwide.  TRAVEL CARD ICICI Bank Travel Card. The Hassle Free way to Travel the world. Traveling with US Dollar, Euro, Pound Sterling or Swiss Francs; Looking for security and convenience; take ICICI Bank Travel Card. Issued in duplicate. Offers the Pin based security. Has the convenience of usage of Credit or Debit card.MOBILE BANKINGBank on the move with ICICI Bank Mobile Banking. With ICICI Bank,Banking is no longer what it used to be. ICICI Bank offers MobileBanking facility to all its Bank, Credit Card, Demat and Loancustomers.ICICI Bank Mobile Banking can be divided into two broad categories offacilities:Alert facility : ICICI Bank Mobile Banking Alerts facility keeps youinformed about the significant transactions in yits Accounts. It keepsyou updated wherever you go.Request facility : ICICI Bank Mobile Banking Requests facility enablesyou to query for yits account balance.
  • 21. INVESTMENT PRODUCTS: Along with Deposit products and Loanofferings, ICICI Bank assists you to manage yits finances by providingvarious investment options ranging from ICICI Bank Tax Saving Bondsto Equity Investments through Initial Public Offers and Investment inPure Gold. ICICI Bank facilitates following investment products: • ICICI Bank Tax Saving Bonds • Government of India Bonds • Investment in Mutual Funds • Initial Public Offers by Corporates • Investment in "Pure Gold" • Foreign Exchange Services • Senior Citizens Savings Scheme, 2004TRADE-SERVICES: ICICI Bank offers online remittances as well asonline processing of letters of credit and bank guarantees.ASSET-MANAGEMENT: Prudential ICICI Asset Management Companyoffers a wide range of retail mutual fund products tailored to suit varied riskand maturity profiles.
  • 22. CASH MANAGEMENT: ICICI Bank offers a complete range ofhighly customized solutions for managing both the collections and paymentsrequirements of clients by leveraging technology. Daily customizedtransactions reports and real time web-enabled downloads, provide on-tapinformation facilitating effective working capital management.CORPORATE BANKING: ICICI Bank offers comprehensive andcustomized financial solutions for its corporate clients, includingrupee and foreign currency debts, working capital credit, structuredfinancing syndication and transaction banking products and services.INTERNET BANKING: Internet banking is available to all ICICI banksavings and deposit account holders, credit card, demat and loancustomers. Internet banking service offers customers a world ofconvenience with services such as balance enquiry, transactionhistory, account statement, bill payments, fund transfers andaccounts related service requests.ATMs: With more than 2500 ATMs across the country, ICICI Bank has oneof the largest ATM networks in India
  • 23. PHONE BANKING: Phone banking offers 24*7 service acrossliability, asset and investment products to both retail and corporatecustomers.NRI-BANKING: A gamut of services to take care of all NRI bankingneeds including deposits, money transfers and private banking.MONEY2INDIA: A complete range of online and offline moneytransfer solutions to send money to India.PROPERTY: For millions of home buyers across the country, ICICI Bank offers not just great deals on home loans but also a wealthof expert advice. ICICI Bank offers home search service which can help a customer identify the property of his choice based on hisbudget and other requirements.DEMAT ACCOUNTS: ICICI Bank’s demat services after unique featureslike e-constructions, consolidation, digitally signed statements, mobilerequests and corporate benefit tracking.RURAL-BANKING: Bank offers technology-based solutions, financialinnovations and multiple delivery channels to meet the financial needs ofrural areas.MICROFINANCE: ICICI Bank assists over 2.5 million low income clientsto build livelihoods by partnering With over 100 microfinance institutions.BRANCHES: ICICI Bank has a network of over 630 branches ( of which51 are extension counters) across the country. The network puts a wide
  • 24. range of banking products and financial services with in easy reach of retailand corporate customers.1.3.6 RISK ASPECTS OF ICICI BANKRISK MANAGEMENTRisk is an integral part of the banking business and bank aim atdelivering superior shareholder value by achieving an appropriatetrade-off between risk and returns. Bank is exposed to various risks,including credit risk, market risk and operational risk. Bank’s riskmanagement strategy is based on a clear understanding of various risks,disciplined risk assessment and measurement procedures andcontinuous monitoring. The policies and procedures established for thispurpose are continuously benchmarked with international bestpractices. Bank has two dedicated groups, the RISK MANAGEMENTGROUP (RMG) and COMPLIANCE & AUDIT GROUP (CAG) whichis responsible for assessment, management and mitigation of risk inICICI Bank. These groups from part of the corporate center arecompletely independent of all business operations and are accountableto the Risk and Audit committees of the Board of directors. RMG isfurther organized into the Credit Risk Management group, MarketRisk Management group, Retail Risk Management group andOperational Risk Management group. CAG is further organised intothe Credit Policies, RBI Inspection & Anti-Money Laundering Groupand the Internal Audit Group.CREDIT RISKCredit risk is the risk that a borrower is unable to meet its financial obligations to the lender. Bank measure, monitor and managecredit risk for each borrower and also at the portfolio level. Bank has standardized credit-approval processes, which include a well-established procedure for comprehensive credit appraisal and rating. ICICI Bank has well developed internal credit rating
  • 25. methodologies for rating obligors. The rating factors in quantitative, qualitative issues and credit enhancement features specific to thetransaction. The rating serves as a key input in the approval as well as post-approval credit processes. Industry knowledge isconstantly updated through field visits and interactions with clients, regulatory bodies and industry experts. In retail credit operations,the Board or a Board Committee approves all products, policies and authorizations. Credit approval authority lies only with the creditofficers who are distinct from the sales team. Credit scoring models are used in the case of certain products like credit cards.External agencies such as field investigation agencies and credit processing agencies are used to facilitate a comprehensive duediligence process including visits to offices and homes in the case of loans to individual borrowers.MARKET RISKMarket risk is the risk of loss resulting from changes in interest rates, foreign currency exchange rates, equity prices and commodityprices. The objective of market risk management is to minimize the impact of losses on earnings and equity capital due to market risk.Market risk policies include the Investment Policy and the Asset-Liability Management (ALM) Policy. The policies are approved bythe Board of Directors. The Asset Liability ManagementCommittee (ALCO) of the Board of Directors stipulate liquidity and interest rate risk limits, monitors adherence to limits, articulatesthe organisation’s interest rate view and determines the strategy in light of the current and expected environment. These policies andprocesses are articulated in the ALPM policy. The investment policy addresses issues related to investment in various tradingproducts. RMG exercises independent control over the process of market risk management and recommends changes in process andmethodologies for measuring market risk Interest rate risk is measured through the use of re-pricing gap analysis and durationanalysis. Liquidity risk is measured through gap analysis. Bank ensure adequate liquidity at all time through systematic funds planningand maintenance of liquid investment as well as focusing on more stable funding sitsces such as retail deposits. ICICI Bank limitexposure to exchange rate risk by stipulating position limits. The treasury Middle Office Group monitors the asset-liability positionunder the supervision of the ALCO. The Treasury Middle Office Group is also responsible for processing treasury transactions,tracking the daily funds position and complying with all treasury related management and regulatory reporting requirements.OPREATIONAL RISKOperational risk is the risk of loss that can result from a variety offactors, including failure to obtain proper internal authorizations,improperly documented transactions, failure of operational andinformation security procedures, computer systems, software orequipment, fraud, inadequate training and employee errors. Bank’sapproach to operational risk management is designed to mitigateoperational risk by maintaining a comprehensive system of internalcontrols, establishing systems and procedures to monitor transactions,maintaining key back-up procedures and undertaking regularcontingency planning. Effective operational risk management systemwould ensure that bank has sufficient information to make appropriate
  • 26. decisions about additional controls, adjustments to controls, or otherrisk responses. Operational risk management policy aims at minimizinglosses and customer dissatisfaction due to failure in processes, focusingon flaws in products and their design that can expose the bank to lossesdue to fraud, analyzing the impact of failures in systems, developingmitigants to minimize the impact and developing plans to meet externalshocks that can adversely impact continuity in the bank’s operations.1.3.7 SUBSIDIARY COMPANIES • DOMESTIC SUBSIDIARIES  ICICI Home Finance Company Limited  ICICI Investment Management Company Limited  ICICI Lombard General Insurance Company Limited  ICICI Prudential Life Insurance Company Limited  ICICI Securities Limited  ICICI Trusteeship Services Limited  ICICI Venture Funds Management Company Limited  ICICI Securities Primary Dealership Limited  ICICI Prudential Asset Management Company Limited  ICICI Prudential Trust Limited • INTERNATIONAL SUSIDIARIES  ICICI Bank Canada  ICICI Bank Eurasia Limited Liability Company  ICICI International Limited  ICICI Securities Holding Inc
  • 27.  ICICI Securities Inc  ICICI Bank Uk Limited1.3.8 KEY GROUP COMPANIESICICI PRUDENTIAL INSURANCE COMPANYICICI Life continued to maintain its market leadership among privatesector life insurance companies with a market share of 29% on the basisof weighted received premium. Life insurance companies worldwidemake losses in the initial years, in view of business set-up and customeracquisition costs in the initial years as well as reserving for actuarialliability. While the growing operations of ICICI Life had a negative
  • 28. impact of Rs. 480 crore (US$ 110 million) on the Bank’s consolidatedprofit after tax in FY2007 on account of the above reasons, thecompany’s unaudited New Business Achieved Profit (NBAP) forFY2007 was Rs. 881 crore (US$ 203 million) as compared to Rs. 528crore (US$ 121 million) in FY2006.ICICI LOMBARD GENERAL INSURANCE COMPANYICICI Lombard General Insurance Company (ICICI General) enhanced itsleadership position with a market share of about 35% among private sectorgeneral insurance companies and an overall market share of about 12.4%during April 2006-February 2007. ICICI General’s gross written premiumgrew by 89% from Rs. 1,592 crore (US$ 366 million) in FY2006 to Rs.3,004 crore (US$ 691 million) in FY2007. ICICI General is required toexpense upfront, on origination of a policy, all sitscing expenses related tothe policy. While ICICI General’s profit after tax for FY2007 was Rs. 68crore (US$ 16 million), its combined ratio for FY2007 was 97%. Thecombined ratio is the sum of net claims and expenses as a percentage ofpremiums and indicates the surplus generated on an annualised basis fromthe business written during a period (excluding investment income). Thesurplus based on the combined ratio, and investment income aggregated Rs.180 crore (US$ 41 million) on a pre tax basis in FY2007.ICICI PRUDENTIAL AMC & TRUSTAt March 31, 2007, ICICI Prudential Asset Management Company (ICICIAMC) was among the top two asset management companies in India withassets under management of over Rs. 37,900 crore (US$ 8.7 billion). ICICI
  • 29. AMC’s profit after tax increased by 55% to Rs. 48 crore (US$ 11 million) inFY2007 from Rs. 31 crore in FY2006 (US$ 7 million).ICICI SECURITIES LIMITEDThe securities and primary dealership business of the ICICI group have beenreorganised. ICICI Securities Limited has been renamed as ICICI PrimaryDealership Limited. ICICI Brokerage Services Limited has been renamed asICICI Securities Limited and has become a direct subsidiary of ICICI Bank.Erstwhile ICICI Webtrade Limited was amalgamated with ICICI SecuritiesLimited during fiscal 2007. ICICI Securities achieved a profit after tax ofRs. 0.63 billion and ICICI Securities Primary Dealership achieved a profitafter tax of Rs. 1.33 billion, in fiscal 2007.ICICI VENTURE FUNDS MANAGEMENT COMPANY LIMITEDICICI Venture Funds Management Company Limited (ICICI Venture)strengthened its leadership position in private equity in India, with fundsunder management of about Rs. 98.00 billion at year-end fiscal 2007. ICICIVenture achieved a profit after tax of Rs. 0.70 billion in fiscal 2007compared to Rs. 0.50 billion in fiscal 2006.1.3.9 PUBLIC RECOGNITION
  • 30. During fiscal 2007, ICICI Bank received several prestigiousaward in recognition of overall business strategies, specificobjectives and technology focus:  Bank of the Year 2006 India by The Banker  Best Transaction Bank in India by Asset Triple AAA  Best Trade Finance in India by Asset Triple AAA  Best Domestic Custody in India by Asset Triple AAA  Best Bank of the Year 2006 by Business India  Business Leadership Award in the Banking category by NDTV Profit  National Award for Excellence in Energy Management by CII  Most Admired Bank by Business Baron  Best Integrated Consumer Bank Site in Asia by Global Finance  Best Presentment and Payment in Asia by Global Finance  Best Consumer Internet Bank in India by Global Finance  Best Corporate/Institutional Internet Bank in India by Global Finance  Best Retail Bank India by Asian Banker  Excellence in Multi Channel Distribution by Asian Banker  Excellence in Automobile Lending Award by Asian Banker  Most Trusted Brand Award by Readers Digest
  • 32. 2.1 STUDY OF PROFIT& LOSS A/CMEANING: It is a financial statement, which shows net loss of a company for a specified period. The accounting year meanscalendar year of 12 months or less or more than 12 months.CONTENTS: This presents the revenues and expenses of a company and shows the excess of revenues over expenses for profit andvice versa for a loss.FORMAT: The Companies act does not provide any specific format for thisaccount. However it is required to be prepared on the basis of theinstructions given in part ii of schedule (vi) of the companies act.MAIN ITEMS OF PROFIT AND LOSS ACCOUNTTurnover or sales: The aggregate amount of sales and connected items withthe sales such as commission paid to sole-selling agents and other sellingagents and brokerage and discounts on sales other than usual trade discount.Depreciation: The amount of depreciation of fixed assets and the arrears ofdepreciation as per section 205(2) shall be disclosed by way of foot-note.Interest on loans and debentures: Interest on loans and debentures has tobe stated separately. It will include the amount of interest paid as well asoutstanding.Miscellaneous expenses: In this head items such as rates and taxes,insurance premium etc., must be stated separately.Preliminary expenses: Such expenses include the costs of formation of acompany and since their amount is usually large, it is not desirable to writeoff them in one year.Provision for taxation: The profit and loss account of a company must bedebited with the estimated liabilities for tax on the current profits at currentrates of taxation.
  • 33. Unclaimed dividends: it is shown on the liabilities side of the balance sheet under theheading ‘current liabilities ‘.Interim dividends: It is an item of appropriation. It is transferred to thedebit side of the Profit and loss appropriation account.Final dividend as an item of the trial balance: This is shown in the debit side of theappropriation section of the profit and loss account.Proposed dividend or final dividend proposed: Since it is an adjustmentitem, it has to be shown at two places- In the debit side of the profit and lossappropriation account and on the liabilities side of the balance sheet underthe head ‘current liabilities and provisions’.Political donations: It must be shown as a separate item in the profit andloss account.Dividend on interest income: This item is transferred to the credit side of the profitand loss account.Payment to auditors: It must be stated separately. This will includeconsultancy fee, auditing fees management services etc.Managerial remuneration: This includes the payments made to managerialremuneration director’s fee, pension, other allowances and commission.2.2 STUDY OF BALANCE SHEETMEANING: The balance sheet is a financial snapshot of a companyscondition at a single point in time. A balance sheet contains a listing of thecompanys asset, liability and Capital accounts. When someone, whether acreditor or investor, asks you how your company is doing, youll want tohave the answer ready and documented. The way to show off the success ofyour company is a balance sheet. A balance sheet is a documented report ofyour companys assets and obligations, as well as the residual ownership
  • 34. claims against your equity at any given point in time. It is a cumulativerecord that reflects the result of all recorded accounting transactions sinceyour enterprise was formed. You need a balance sheet to specifically knowwhat your companys net worth is on any given date. With a properlyprepared balance sheet, you can look at a balance sheet at the end of eachaccounting period and know if your business has more or less value, if yourdebts are higher or lower, and if your working capital is higher or lower. Byanalyzing your balance sheet, investors, creditors and others can assessyour ability to meet short-term obligations and solvency, as well as yourability to pay all current and long-term debts as they come due. The balancesheet also shows the composition of assets and liabilities, the relativeproportions of debt and equity financing and the amount of earnings thatyou have had to retain. Collectively, external parties to help assess yourcompany’s financial status, which is required by both lending institutionsand investors before they will allot any money toward your business, willuse this information.LEARN THE DIFFERENT ASSETSCurrent assets: Current assets include cash and other assets that in thenormal course of events are converted into cash within the operating cycle.For example, a manufacturing enterprise will use cash to acquire inventoriesof materials. These inventories of materials are converted into finishedproducts and then sold to customers. Cash is collected from the customers.This circle from cash back to cash is called an operating cycle. In amerchandising business one part of the cycle is eliminated. Materials are notpurchased for conversion into finished products. Instead, the finishedproducts are purchased and are sold directly to the customers. Several
  • 35. operating cycles may be completed in a year, or it may take more than a yearto complete one operating cycle. The time required to complete an operatingcycle depends upon the nature of the business. It is conceivable that almostall of the assets that are used to conduct your business, such as buildings,machinery, and equipment, can be converted into cash within the timerequired to complete an operating cycle. However, your current assets areonly those that will be converted into cash within the normal course of yourbusiness. The other assets are only held because they provide useful servicesand are excluded from the current asset classification. If you happen to holdthese assets in the regular course of business, you can include them in theinventory under the classification of current assets. Current assets are usuallylisted in the order of their liquidity and frequently consist of cash, temporaryinvestments, accounts receivable, inventories and prepaid expenses.Cash: Cash is simply the money on hand and/or on deposit that is availablefor general business purposes. It is always listed first on a balance sheet.Cash held for some designated purpose, such as the cash held in a fund foreventual retirement of a bond issue, is excluded from current assets.Marketable Securities: These investments are temporary and are madefrom excess funds that you do not immediately need to conduct operations.Until you need these funds, they are invested to earn a return.Accounts Receivable: Simply stated, accounts receivables are the amountsowed to you and are evidenced on your balance sheet by promissory notes.Accounts receivable are the amounts billed to your customers and owed toyou on the balance sheets date. You should label all other accountsreceivable appropriately and show them apart from the accounts receivable
  • 36. arising in the course of trade. If these other amounts are currently collectible,they may be classified as current assets.Inventories: Your inventories are your goods that are available for sale,products that you have in a partial stage of completion, and the materials thatyou will use to create your products. The costs of purchasing merchandiseand materials and the costs of manufacturing your various product lines areaccumulated in the accounting records and are identified with either the costof the goods sold during the fiscal period or as the cost of the inventoriesremaining.Prepaid expenses: These expenses are payments made for services that willbe received in the near future. Strictly speaking, your prepaid expenses willnot be converted to current assets in order to avoid penalizing companiesthat choose to pay current operating costs in advance rather than to holdcash. Often your insurance premiums or rentals are paid in advance.Investments: Investments are cash funds or securities that you hold for adesignated purpose for an indefinite period of time. Investments includestocks or the bonds you may hold for another company, real estate ormortgages that you are holding for income-producing purposes. Yourinvestments also include money that you may be holding for a pension fund.Plant Assets: Often classified as fixed assets, or as plant and equipment,your plant assets include land, buildings, machinery, and equipment that areto be used in business operations over a relatively long period of time. It isnot expected that you will sell these assets and convert them into cash. Plantassets simply produce income indirectly through their use in operations.
  • 37. Intangible Assets: Your other fixed assets that lack physical substance arereferred to as intangible assets and consist of valuable rights, privileges oradvantages. Although your intangibles lack physical substance, they stillhold value for your company. Sometimes the rights, privileges andadvantages of your business are worth more than all other assets combined.Other Assets: During the course of preparing your balance sheet you willnotice other assets that cannot be classified as current assets, investments,plant assets, or intangible assets. These assets are listed on your balancesheet as other assets. Frequently, your other assets consist of advances madeto company officers, the cash surrender value of life insurance on officers,the cost of buildings in the process of construction, and the miscellaneousfunds held for special purposes.LEARN THE DIFFERENT LIABILITIESCurrent Liabilities: On the equity side of the balance sheet, as on the assetside, you need to make a distinction between current and long-term items.Your current liabilities are obligations that you will discharge within thenormal operating cycle of your business. In most circumstances your currentliabilities will be paid within the next year by using the assets you classifiedas current. The amount you owe under current liabilities often arises as aresult of acquiring current assets such as inventory or services that will beused in current operations. You show the amounts owed to trade creditorsthat arise from the purchase of materials or merchandise as accountspayable. If you are obligated under promissory notes that support bank loansor other amounts owed, your liability is shown as notes payable. Othercurrent liabilities may include the estimated amount payable for income
  • 38. taxes and the various amounts owed for wages and salaries of employees,utility bills, payroll taxes, local property taxes and other services.Long-Term Liabilities: Your debts that are not due until more than a yearfrom the balance sheet date are generally classified as long-term liabilities.Notes, bonds and mortgages are often listed under this heading. If a portionof your long-term debt is due within the next year, it should be removedfrom the long-term debt classification and shown under current liabilities.Deferred Revenues: Your customers may make advance payments formerchandise or services. The obligation to the customer will, as a generalrule, be settled by delivery of the products or services and not by cashpayment. Advance collections received from customers are classified asdeferred revenues, pending delivery of the products or services.Owners Equity: Your owners equity must be subdivided on your balancesheet: One portion represents the amount invested directly by you, plus anyportion of retained earnings converted into paid-in capital. The other portionrepresents your net earnings that are retained. This rigid distinction isnecessary because of the nature of any corporation. Ordinarily, stockholders,or owners, are not personally liable for the debts contracted by a company. Astockholder may lose his investment, but creditors usually cannot look to hispersonal assets for satisfaction of their claims. Under normal circumstances,the stockholders may withdraw as cash dividends an amount measured bythe corporate earnings. The distinction in this rule gives the creditors someassurance that a certain portion of the assets equivalent to the ownersinvestment cannot be arbitrarily withdrawn. Of course, this portion could bedepleted from your balance sheet because of operating losses. The owners
  • 39. equity in an unincorporated business is shown more simply. The interest ofeach owner is given in total, usually with no distinction being made betweenthe portion invested and the accumulated net earnings. The creditors are notconcerned about the amount invested. If necessary, creditors can attach thepersonal assets of the owners.Basis of balance-sheet: Assets = Liability + EquityBALANCE-SHEET STRUCTUREThe following Balance sheet structure is just an example. It does not showall possible kind of assets, equity and liabilities, but it shows the most usualones. It could be a consolidated balance sheet. Monetary values are notshown and summary (total) rows are missing as well. AssetsCurrent AssetsCash and cash equivalentsInventoriesAccount receivableInvestment held for tradingOther current assetsNon-Current AssetsProperty, plant and equipmentGoodwillOther intangible fixed assetsInvestment in associatesDeferred tax assets
  • 40. Miscellaneous Expenditure Equity And LiabilitiesCapital & ReserveShare capital reserveRevaluation reserveTranslation reserveRetained earningsMinority interestNon-Current LiabilitiesBank loanIssued debt securitiesDeferred tax liabilityCurrent LiabilitiesAccounts payableCurrent income tax liabilityShort-term part of bank loansShort-term provisionsOther current liabilitiesEQUITY VALUATION:The real value to a purchaser of the business or ashareholder may be different from the net assets shown by the balance sheet.This is because factors that affect the value of a business may not berecorded yet. For example, a purchaser will be interested in the futureearnings of the business, whether assets such as property have been revalued
  • 41. recently, and whether there are potential liabilities in the future such aslawsuits. The value of the assets in the balance has also been based on theassumption that the business is a going concern, otherwise the break-upvalue of the assets may be far less than the value in the balance sheet.PREPAIRING A BALANCE-SHEETTitle and Heading: In practice, the most widely used title is Balance Sheet;however Statement of Financial Position is also acceptable. Naturally, whenthe presentation includes more than one time period the title "BalanceSheets" should be used.Heading: In addition to the statement title, the heading of your balancesheet should include the legal name of your company and the date or datesthat your statement is presented. For example, a comparative presentationmight be headed: XYZ CORPORATION BALANCE SHEETS December 31, 2006Format: There are two basic ways that balance sheets can be arranged. InAccount Form, your assets are listed on the left-hand side and totaled toequal the sum of liabilities and stockholders equity on the right-hand side.Another format is Report Form, a running format in which your assets arelisted at the top of the page and followed by liabilities and stockholdersequity. Sometimes total liabilities are deducted from total assets to equalstockholders equity.Captions: Captions are headings within your statement that designate majorgroups of accounts to be totaled or subtotaled. Your balance sheet should
  • 42. include three primary captions: Assets, Liabilities and Stockholders Equity.In the report form of presentation, the placement of your primary captionswould be as follows: 2006 ASSETS, LIABILITIES ANDSTOCKHOLDER’S EQUITY.Except in certain specialized industries your balance sheet should includethe following secondary captions:CURRENT ASSETSCURRENT LIABILITIESOrder of Presentation of Captions: First, start with items held primarilyfor conversion into cash and rank them in the order of their expectedconversion. Then, follow with items held primarily for use in operations butthat could be converted into cash, and rank them in the order of liquidity.Finally, finish with items whose costs you will defer to future periods or thatyou cannot convert into cash. Following these guidelines, your major assetsshould normally be presented in the following order: • Cash • Short-term marketable securities • Trade notes and accounts receivable • Inventories • Long-term investments • Property and equipment • Intangible assets • Deferred chargesLiabilities are ordinarily presented in the order of maturity as follows:
  • 43. • Demand notes • Trade accounts payable • Accrued expenses • Long-term debt • Other long-term liabilitiesComponents of stockholders equity are usually presented the followingorder: • Preferred stock • Common stock • Additional paid-in capital • Retained earnings • Accumulated other comprehensive income • Treasury stock2.3 STUDY OF CASH FLOW STATEMENTMEANING: Cash flow statement or statement of cash flows is a financialstatement that shows a companys incoming and outgoing money (sourcesand uses of cash) during a time period (often monthly or quarterly). Thestatement shows how changes in balance sheet and income accounts affectedcash and cash equivalents, and breaks the analysis down according tooperating, investing, and financing activities. As an analytical tool thestatement of cash flows is useful in determining the short-term viability of acompany, particularly its ability to pay bills.PURPOSE: The cash flow statement reflects a firms liquidity or solvency.The main purpose to make cash flow statement are as follows:
  • 44. 1. provide information on a firms liquidity and solvency and its ability to change cash flows in future circumstances 2. provide additional information for evaluating changes in assets, liabilities and equity 3. improve the comparability of different firms operating performance by eliminating the effects of different accounting methods 4. indicate the amount, timing and probability of future cash flowsACTIVITIES INVOLVED IN CASH FLOW: The cash flow statement ispartitioned into cash flow resulting from operating activities, cash flowresulting from investing activities, and cash flow resulting from financingactivities.Operating activities: Operating activities include the production, sales anddelivery of the companys product as well as collecting payment from itscustomers. This could include purchasing raw materials, building inventory,advertising.Investing activities: Investing activities focus on the purchase of the long-term assets a company needs in order to make and sell its products, and theselling of any long-term assets.Financing activities: Financing activities include the inflow of cash frominvestors such as banks and shareholders, as well as the outflow of cashto shareholders as dividends as the company generates income. Otheractivities which impact the long-term liabilities and equity of thecompany are also listed in the financing activities section of the cashflow statement.Analysis of cash flow statement is necessary for every organisation to depict its cash inflow and outflow.
  • 45. 2.4 FINANCIAL STATEMENT ANALYSISMEANING:Financial statement analysis is the process of examining relationships amongfinancial statement elements and making comparisons with relevantinformation. It is a valuable tool used by investors and creditors, financialanalysts, and others in their decision-making processes related to stocks,bonds, and other financial instruments. With a great understanding of thebalance sheet & p&l account and how it is constructed, we can look at sometechniques to analyze the information contained within the balance sheet &p&l account.PURPOSE:The main purpose of analyzing the financial statement are thefollowing:-  To assess past performance and current financial position.  To make predictions about the future performance of a company.TOOLS FOR ANALYSING 1. PERCENTAGE CALCULATION There are two popular methods by which we can analyze the financial statement by calculating percentage as taking a common base. Horizontal Analysis When an analyst compares financial information for two or more years for a single company, the process is referred to as horizontal analysis, since the analyst is reading across the page to compare any single line item, such as sales revenues. In addition to
  • 46. comparing dollar amounts, the analyst computes percentagechanges from year to year for all financial statement balances,such as cash and inventory. Alternatively, in comparing financialstatements for a number of years, the analyst may prefer to use avariation of horizontal analysis called trend analysis. Trendanalysis involves calculating each years financial statementbalances as percentages of the first year, also known as the baseyear. When expressed as percentages, the base year figures arealways 100 percent, and percentage changes from the base yearcan be determined.If we want to calculate % change in sales then we apply thefollowing formula:Percentage=change in sales /Base Year Sales*100Vertical AnalysisWhen using vertical analysis, the analyst calculates each item on asingle financial statement as a percentage of a total. The termvertical analysis applies because each years figures are listedvertically on a financial statement. The total used by the analyston the income statement is net sales revenue, while on the balancesheet it is total assets. This approach to financial statementanalysis, also known as component percentages, producescommon-size financial statements. Common-size balance sheets andincome statements can be more easily compared, whether acrossthe years for a single company or across different companies.If we want to calculate % change of current assets then we applythe following formula:
  • 47. Percentage: current assets/total assets*100 2. RATIO ANALYSIS Financial ratio analysis uses formulas to gain insight into the company and its operations. For the balance sheet, using financial ratios (like the debt-to-equity ratio) can show you a better idea of the company’s financial condition along with its operational efficiency. It is important to note that some ratios will need information from more than one financial statement, such as from the balance sheet and the income statement. Ratio analysis facilitates inter-firm and intra- firm comparison. Ratios are often classified using the following terms:LIQUIDITY RATIO Liquidity ratios are measures of the short-term ability of the company to pay its debts when they come due and to meet unexpected needs for cash. • Current Ratio: The current ratio is a rough indication of a firm ability to service its current obligations. Generally, the higher the current ratio, the greater the cushion between current obligations and a firm ability to pay them. The stronger ratio reflects a numerical superiority of current assets over current liabilities Current ratio is calculated as follows: Current ratio= Current Assets/Current Liabilities • Quick Ratio: It is also known as the “acid test” ratio, this is a refinement of the current ratio and is a more conservative measure of liquidity. The quick ratio expresses the degree to which a company’s current liabilities are recovered by the most liquid current assets. quick ratio is calculated as follows:
  • 48. Quick ratio= (cash + marketable securities + Receivables)/current liabilitiesSOLVENCY RATIO Solvency ratios indicate the ability of the company to meet its long-term obligations on a continuing basis and thus to survive over a long period of time. • Debt/Worth Ratio: This ratio expresses the relationship between capital contributed by creditors and that contributed by owners. It expresses the degree of protection provided by the owners for the creditors. The higher the ratio, the greater the risk being assumed by creditors. The lower the ratio, the greater the long-term financial safety. A firm with a low debt/worth ratio usually has a greater flexibility to borrow in the future. A more highly leveraged company has a more limited debt capacity.Debt/worth ratio=Total Liabilities / Tangible Net WorthPROFITABILITY RATIO Profitability ratios are gauges of the companys operating success for a given period of time. • Return On Assets: Return on assets is a measure of how effectively the firm’s assets are being used to generate profit. It is calculated as follows: Return On Assets= Net Income/Total Assets
  • 49. • Return On Equity: Return on equity is the bottom line measure for the shareholders, measuring for the profits earned for each rupee invested in business. It is calculated as follows: Return on Equity= Net income/shareholder’s equityFixed/Worth Ratio: This ratio measures the extent to which owner’sequity (capital) has been invested in plant and equipment (fixed assets).A lower ratio indicates a proportionately smaller investment in fixedassets in relation to net worth and a better cushion for creditors in caseof liquidation. Similarly, a higher ratio would indicate the oppositesituation. The presence of substantial leased fixed assets (not shown onthe balance-sheet ) may deceptively lower this ratio. Fixed Worth Ratio=Net Fixed Assets/ Tangible Net Worth
  • 51. 3.1 MANAGEMENT DISCUSSION & ANALYSIS SUMMARY: • Profit before provisions and tax increased 51.1% to Rs. 58.74 billion in fiscal 2007 from Rs. 38.88 billion in fiscal 2006 primarily due to an increase in net interest income by 40.9% to Rs. 66.36 billion in fiscal 2007 from Rs. 47.09 billion in fiscal 2006 and an increase in non- interest income by 39.4% to Rs. 59.14 billion in fiscal 2007 from Rs. 42.42 billion in fiscal 2006, offset, in part, by an increase in non- interest expenses by 33.8% to Rs. 66.91 billion in fiscal 2007 from Rs. 50.01 billion in fiscal 2006. • Provisions increased significantly during fiscal 2007 due to higher provisions created on standard assets and lower level of write-backs. Profit before general provisioning and tax increased 27.4% to Rs. 43.79 in fiscal 2007 from Rs. 34.36 billion in fiscal 2006. Profit after tax increased 22.4% to Rs. 31.10 billion in fiscal 2007 from Rs. 25.40 billion in fiscal 2006. • Net interest income increased 40.9% to Rs. 66.36 billion in fiscal 2007 from Rs. 47.09 billion in fiscal2006, reflecting an increase of 49.8% in the average volume of interest-earning assets.
  • 52. • Non-interest income increased by 39.4% to Rs. 59.14 billion in fiscal 2007 from Rs. 42.42 billion in fiscal 2006 primarily due to a 45.4% increase in fee income.• Non-interest expenses increased 33.8% to Rs. 66.91 billion in fiscal 2007 from Rs. 50.01 billion in fiscal 2006 primarily due to 49.4% increase in employee expenses and 41.9% increase in other administrative expenses.• Provisions and contingencies (excluding provision for tax) increased to Rs. 22.26 billion in fiscal 2007 from Rs. 7.92 billion in fiscal 2006 primarily due to higher provisions created on standard assets in accordance with the revised guidelines issued by RBI, a higher level of specific provisioning on retailloans due to change in the portfolio mix towards non collateralised loans and seasoning of the loan portfolio and lower level of write-backs.• Total assets increased 37.1% to Rs. 3,446.58 billion at year-end fiscal 2007 from Rs. 2,513.89 billion at year-end fiscal 2006 primarily due to an increase in loans by 34.0% and an increase in investments by 27.5%.• FEE INCOME Fee income increased by 45.4% to Rs. 50.12 billion in fiscal 2007 from Rs. 34.47 billion in fiscal 2006 primarily due to growth in fee income from retail products and services, including fee arising from
  • 53. retail assets products and retail liability related fee income like account servicing charges and third party distribution fees. Fees from corporate banking and international business also witnessed a strong growth.• TREASURY INCOMEThe gross treasury income increased to Rs. 10.14 billion in fiscal 2007from Rs. 7.40 billion in fiscal 2006 primarily due to higher level of gainsfrom equity divestments, offset in part by 24.6% increase in premiumamortisation on Government securities to Rs. 9.99 billion in fiscal 2007from Rs. 8.02 billion in fiscal 2006 and lower profits on proprietorytrading as a result of the sharp fall in the equity markets in May 2006 andadverse conditions in debt markets. The amortisation of premium onGovernment securities which was earlier shown as provisions andcontingencies has been reclassified under income from treasury-relatedactivities as per the revised guidelines of RBI.• LEASE & OTHER INCOME Lease income decreased by 34.1% to Rs. 2.38 billion in fiscal 2007 from Rs. 3.61 billion in fiscal 2006 primarily because of a decrease in leased assets to Rs. 10.03 billion at year-end fiscal 2007 compared to Rs. 11.74 billion at year-end fiscal 2006 since we are not entering into new lease transactions. Other income increased by 53.0% to Rs. 6.64 billion for fiscal 2007 compared to Rs. 4.34 billion in fiscal 2006 primarily due to increase in income by way of dividend from our
  • 54. subsidiary companies and increase in profit on sale of land, buildings and other assets.• PROVISIONS AND TAX Provisions and contingencies (excluding provision for tax) increased to Rs. 22.26 billion in fiscal 2007 from Rs. 7.92 billion in fiscal 2006 primarily due to higher provisions created on standard assets, in accordance with the revised guidelines issued by RBI, a higher level of specific provisioning on retail loans due to change in the portfolio mix towards non collateralised loans and seasoning of the loan portfolio and lower level of write-backs.• It’s total assets increased by 37.1% to Rs. 3,446.58 billion at year-end fiscal 2007 from Rs. 2,513.89 billion at year-end fiscal 2006 primarily due to increase in advances and investments. Net advances increased by 34.0% to Rs. 1,958.66 billion at year-end fiscal 2007 from Rs. 1,461.63 billion at year-end fiscal 2006 primarily due to increase in retail advances in accordance with our strategy of growth in our retail portfolio, offset, in part, by reduction in advances due to repayments and securitisation. Retail advances increased 38.5% to Rs. 1,277.03 billion at year-end fiscal 2007 from Rs. 921.98 billion at year-end fiscal 2006.• Total investments at year-end fiscal 2007 increased by 27.5% to Rs. 912.58 billion compared to Rs. 715.47 billion at year-end fiscal 2006 primarily due to 31.9% increase in investment in Government and
  • 55. other approved securities in India to Rs. 673.68 billion at year-end fiscal 2007 from 510.74 billion at year-end fiscal 2006 in line with the increase in our net demand and time liabilities. Banks in India are required to maintain a specified percentage, currently 25.0%, of their net demand and time liabilities by way of liquid assets like cash, gold or approved unencumbered securities. Other investments (including debentures and bonds) increased by 16.7% to Rs. 238.90 billion at year-end fiscal 2007 compared to Rs. 204.73 billion at year-end fiscal 2006, reflecting an increase in investments in insurance and international subsidiaries, pass through certificates and credit linked notes. Total assets (gross) of overseas branches (including overseas banking unit in Mumbai) increased by 90.2% to Rs. 524.71 billion at year-end fiscal 2007 from Rs. 275.86 billion at year-end fiscal 2006.• It’s equity share capital and reserves at year-end fiscal 2007 increased to Rs. 243.13 billion as compared to Rs. 222.06 billion at year-end fiscal 2006 primarily due to retained earnings for the year and exercise of employee stock options.• As per the transition provision of Accounting Standard 15 - (Revised) on “Accounting for retirement benefits in financial statements of employer”, the difference in the liability on account of retirement benefits created by the Bank at March 31, 2006 due to the revised standard have been adjusted in “Reserves and Surplus”. Total deposits increased 39.6% to Rs. 2,305.10 billion at year end fiscal 2007 from Rs. 1,650.83 billion at year-end fiscal 2006. This is commensurate
  • 56. with our focus of increased funding through deposits. Our savings account deposits increased to Rs. 288.38 billion at year-end fiscal 2007 from Rs. 209.37 billion at year-end fiscal 2006, while current deposits increased to Rs. 213.76 billion at year-end fiscal 2007 from Rs. 165.73 billion at year-end fiscal 2006. Term deposits increased by 41.3% to Rs. 1,802.96 billion at year-end fiscal 2007 from Rs. 1,275.73 billion at yearend fiscal 2006. Total deposits at year-end fiscal 2007 constituted 76.5% of our funding (i.e. deposit, borrowings and subordinated debts). Borrowings (including subordinated debt) increased to Rs. 706.61 billion at year-end fiscal 2007 from Rs. 486.66 billion at year-end fiscal 2006 primarily due to increase in borrowings of foreign branches.• Contingent liabilities increased by 42.5% or Rs. 1,679.25 billion to Rs. 5,629.60 billion at year-end fiscal 2007 from Rs. 3,950.35 billion at year-end fiscal 2006 primarily due to a 35.4% increase in interest rate swaps and currency options and a 45.0% increase in liability on account of outstanding forward exchang econtracts.• NPAS (NON PERFORMING ASSETS) The ratio of net non-performing assets to net customer assets increased to 0.98% at year-end fiscal 2007 compared to 0.71% at year-end fiscal 2006. At year-end fiscal 2007, the gross non- performing assets (net of write-offs and unpaid interest) were Rs. 41.68 billion compared to Rs. 22.73 billion at year end fiscal 2006. Gross of technical write-offs, the gross non-performing assets at year- end fiscal 2007 were Rs. 48.50 billon compared to Rs. 29.63 billion at
  • 57. year-end fiscal 2006. The coverage ratio (i.e. total provisions and technical write-offs made against non-performing assets as a percentage of gross non performing assets) at year-end fiscal 2007 was 58.37% compared to 63.72% at year-end fiscal 2006. In addition, total general provision made against standard assets was Rs. 12.95 billion at year-end fiscal 2007. Our investments in security receipts issued by Asset Reconstruction Company (India) Limited, a reconstruction company registered with RBI were Rs. 25.38 billion at year-end fiscal 2007. Our net restructured standard loans decreased from Rs. 53.16 billion at year-end fiscal 2006 to Rs. 48.83 billion at year-end fiscal 2007.• The effective tax rate of 14.7% for fiscal 2007 was lower compared to the statutory tax rate of 33.66% primarily due to concessional rate of tax on capital gains, exemption of dividend income, deduction towards special reserve and deduction of income of offshore banking unit. (RS. IN BILLION) YEAR ENDED March 31, 2005 March 31, 2006 March 31, 2007 GROSS NPA 34.37 22.73 41.68 NET NPA 19.83 10.75 20.19NET CUSTOMER 978.94 1,520.07 2,053.74 ASSETS
  • 58. % OF NET NPA TO 2.03% 0.71% 0.98% NET CUSTOMER ASSETS • DIVIDEND The Board has recommended a higher dividend of 100% for FY2007 i.e. Rs. 10 per equity share (equivalent to US$ 0.46 per ADS) as compared to 85% for FY2006 primarily due to higher provisions created on standard assets ,a higher level of specific provisioning on retail loans. • CONSOLIDATED PROFIT The consolidated profit after tax increased 14% to Rs. 2,761 crore (US$ 635 million) in FY2007 from Rs. 2,420 crore (US$ 557 million) in FY2006. The consolidated profit was lower than the standalone profit due to the accounting losses of ICICI Prudential Life Insurance Company (ICICI Life). Its profit under US GAAP accounts was Rs. 31.27 billion as compared to consolidated profit of Rs. 27.61 billion under Indian GAAP in fiscal 2007.3.2 COMPARATIVE INCOME STATEMENT TREND ANALYSIS SUMMARISED PROFIT & LOSS A/C (ON 31 MARCH, 2007) (RS. IN BILLION) PARTICULARS 2005 2006 2007 %Change %Change (RS.) (RS.) (RS.) (2006) (2007)Interest income 94.10 143.06 229.94 46.5% 60.7%Interest expense 65.71 95.97 163.8 46.1% 70.4%
  • 59. Net interest income 28.39 47.09 66.36 47.5% 40.9%Non-interest income 27.05 42.42 59.14 49.9% 39.4%– Fee income 20.98 34.47 50.12 55.3% 45.4%– Lease income 4.01 3.61 2.38 (10.0) (34.1)– Others 2.06 4.34 6.64 111.2% 53.0%Core operating income 55.44 89.51 125.50 48.7% 40.2%Operating expenses 25.17 35.47 49.79 40.9% 40.3%Direct marketing agency 4.85 11.77 15.24 35.1% 29.5%(DMA) expenseLease depreciation, net of 2.97 2.77 1.88 (6.7) (31.9)lease equalizationCore operating profit 22.45 39.50 58.59 67.6% 48.3%Net treasury income - (0.62) 0.15 - -Operating profit 29.56 38.88 58.74 58.7% 51.1%Provisions, net of write- 4.29 7.92 22.26 84.61% 181.1%backsProfit before tax 25.27 30.97 36.48 22.6% 17.8%Tax, net of deferred tax 5.22 5.56 5.38 6.7% (3.2)Profit after tax 20.05 25.40 31.10 26.7% 22.4%By anlysing the summarized profit & loss account of ICICIBank, the following trends are presented:  Operating profit increased 51% to Rs. 5,874 crore for FY2007 from Rs. 3,888 crore for FY2006 which is less than as compared to increased 58.7% to Rs. 3,888 crore for FY 2006 from Rs. 2,956 crore for FY2005.  Profit after tax increased 22% to Rs. 3,110 crore for FY2007 from Rs. 2,540 crore for FY2006 which is less than as compared to increased 26.7% to Rs. 2,540 crore for FY2006 from Rs. 2,005 crore for FY2005.
  • 60.  Profit before tax increased 18% to Rs. 3,648 crore for FY2007 from Rs. 3,097 crore for FY2006 which is also less than as compared to increased to 22.6 % to Rs. 3,097 crore for FY2006 fom Rs. 2,527 crore for FY2005.  Net interest income increased 41% to Rs. 6,636 crore for FY2007 from Rs. 4,709 crore for FY2006 which is less than as compared to increased 47.5% to Rs. 4,709 crore for FY2006 from Rs. 2,839 crore for FY2005.  Fee income increased 45% in 2007 which is less than as compared to 55.3% increased in 2006  Interest expenses increased at a very high rate from 46.1% in FY2006 to 70% in FY2007.  Interest income is increased at a higher rate than the previous year i.e. 47% in 2006 to 61% in 2007.  Increase in non-interest income is less than in 2007 49% as compared to increase in 2006 39%.  Provision is increased at a high rate as compared to previous years 85% in 2006 to 181% in 2007.3.3 COMPARATIVE FINANCIAL POSITIONSTATEMENT TREND ANALYSIS SUMMARIZED BALANCE-SHEET
  • 61. (ON MARCH 31, 2007) (RS. In crore) PARTICULARS 2005 2006 2007 %Change %Change (RS.) (RS.) (RS.) (2006) (2007)Cash balance with 47,412 68,115 104,489 43.7% 53%banks & SLR-Cash & bank balances 12,930 17,040 37,121 31.8% 118%-SLR investment 34,482 51,075 67,368 48.1% 32%Advances 91,405 146,163 195,866 59.9% 34%Other Investment 2,854 20,473 23,890 41.9% 17%Fixed and other Assets 12,836 16,638 20,413 29.61% 23% TOTAL ASSETS 167,659 251,389 344,658 49.9% 37%Net Worth 12,550 22,206 24,313 76.9% 9%-Equity Capital 737 890 899 20.8% 1%-Reserves 11,813 21,316 23,414 80.4% 10%Preference Capital 350 350 350 - -Deposits 99,819 165,083 230,510 65.4% 40%Erstwhile ICICI 19,348 13,190 10,837 (31.16%) (18%)BorrowingsOther Borrowings 22,405 35,477 59,823 58.2% 69%Other Liabilities 13,187 15,083 18,824 14.4% 25% TOTAL 167,659 251,389 344,658 49.9% 37% LIABILITIES By anlysing the balance sheet of ICICI Bank, the following trends are presented:  Total assets and total liabilities are increased in 2007 from Rs. 251389 crore to Rs. 344658 Crore i.e. 37% which is less than as compared to increase in 2006 from Rs. 167659 crore to Rs. 251389 crore i.e. 49.9%.
  • 62.  Increase in cash balance with bank in 2007 is more than in the previous year 2006. In 2006 it is 32% and in 2007 it is 118%. But increase in SLR investment in 2007 is less than the previous year. In 2006 it is 48% and in 2007 it is 32%. Increase in advances in 2007 is 60% from 2006 which is less than as compared to increase in advances in 2006 is 34% from 2005. Increase in fixed and other assets is also less than in 2007 from 2006 i.e 23% as compared to 30% in 2006 from 2005. Erstwhile ICICI borrowings is decreasing in both years but rate of decreasing is less in 2007 i.e. 18% but in 2006 it is 31%. Increase in net worth is also less than from previous year in 2007 i.e 80% in 2006 to 9% in 2007. Increase in equity capital is only 1% in 2007 whereas in 2006 it is 21% and increase in reserve in 2007 is very less as compared to increase in 2006 i.e. from 10% to 80%.
  • 63.  40%Deposits is increased in 2007 from 2006 which is less than as compared to 65% increase in deposits in 2006 from 2005.  Increase in other liabilities is more in 2007 than in 2006 i.e from 14% in 2006 to 25% in 2007.  69%borrowing is increased in 2007 from 2006 which is more than as compared to 58% increase in borrowing in 2006 from 2005.3.4 RATIO ANALYSIS 1) CURRENT RATIO: Current Ratio= Current Assets/Current LiabilitiesIn 2006:Current Assets=170.40+1461.63=1632.03 billion (cash +advances)Current Liabilities=165.73+354.77+131.90=652.40billion(short-term deposits+ borrowings) Current Ratio=1632.03/652.40=2.5:1In 2007:Current Assets=371.21+1958.66=2329.87billion (cash +advances)Current Liabilities=213.76+108.37+598.23=920.36 billion(short-term deposits+ borrowings) Current Ratio=2329.87/920.36=2.6:1 2) QUICK RATIO:
  • 64. Quick Ratio=Quick Assets/Current LiabilitiesIn 2006:Quick Assets=170.40billion (cash in hand and other bank)Current Liabilities=652.40billion Quick Ratio=170.40/652.40=0.26:1In 2007:Quick Assets=371.21billion (cash in hand and other bank)Current Liabilities=920.30billion Quick Ratio=371.21/920.30=0.40:1 3) RETURN ON AVERAGE ASSETS:Return on average assets= Net income/average assets*100 average assets= total assets at the beginning + total assets at the end/2In 2006: net income=25.40 billionAverage assets= (1676.59+ 2513.89)/2= 2095.24 Return on average assets= 25.40/2095.24*100 = 1.21%In 2007: net income= 31.10 billionAverage assets= (2513.89+ 3446.58)/2= 2980.24 Return on average assets= 31.10/2980.24*100=1.04% 4) RETURN ON AVERAGE EQUITY: Return on average equity = Net income/average equity*100 average equity= total equity at the beginning + total equity at the end/2In 2006: net income=25.40 billion
  • 65. Average equity= (129.00+225.56)/2= 177.28 Return on average equity= 25.40/177.28*100 = 17.54%In 2007: net income= 31.10 billionAverage equity= (225.56+246.63)/2= 236.10 Return on average equity = 31.10/236.10*100=13.17% 5) FIXED/WORTH RATIO:Fixed Worth Ratio=Net Fixed Assets/ Tangible Net WorthIn 2006:Net Fixed Assets= 39.80 billionTangible Net Worth= 225.55 billion Fixed Worth Ratio=39.80/225.55= 0.18:1In 2007:Net Fixed Assets= 39.23 billionTangible Net Worth= 246.62 billion Fixed Worth Ratio=39.23/246.62 = 0.16:1 6) OPERATING PROFIT TO WORKING FUNDS Operating Profit To Working Funds=operating profit/ average assets*100In 2006:Operating profit=38.80 billionAverage assets=2095.24Operating profit to working fund=38.80/2095.24*100= 1.85%In 2007:Operating profit=58.84 billionAverage assets=2980.84Operating profit to working fund=58.84/2980.84*100= 1.98%
  • 66. (approximately) RATIOS IN 2006 IN 2007Current Ratio 2.5:1 2.6:1Quick Ratio 0.26:1 0.40:1Return On Assets 1.21% 1.04%Return On Equity 17.54% 13.17%Fixed/worth Ratio 0.18:1 0.16:1Operating profit to working funds 1.85% 1.98%The above table shows that:- both current ratio and quick ratiois liquidity ratio. The ideal ratio for current ratio is 2:1 and idealratio for quick ratio is 1:1. In these table current ratio of bothyear is higher than the ideal ratio which shows that there isenough current assets which make the bank able to pay itscurrent liabilities on time but quick ratio is lower than the idealratio which shows that bank have not enough liquid assets topay their current liabilities. Therefore bank should keep someassets in the form of liquid assets such as cash, marketablesecurities etc.Return on equity, return on assets and operating profit toworking funds are profitability ratio. The higher the profitabilityratio of any organization is show the better position of thatorganization. The profitability ratio of ICICI bank is very low. Itis deceasing from the previous year.Fixed/worth ratio measures the extent to which owner’s equityhas been invested in plant and equipment . A lower ratioindicates a proportionately smaller investment in fixed assets.This ratio shows that bank has invested more in current assets
  • 67. than the fixed assets. It could be a good position in case ofliquidation.3.5 CASH FLOW STATEMENT (AS ON YEAR ENDED ON 31ST MARCH, 2007) (rs. In “000’s) PARTICULARS FY2007 FY2006 Cash flow from operating activitiesNet profit before taxes . 36,480,391 30,966,076Adjustments for:Depreciation and amortisation 7,639,002 9,021,206Net (appreciation) / depreciation on 9,918,419 8,301,403investmentsProvision in respect of non-performing 21,592,999 7,947,244assetsProvision for contingencies & others 251,311 226,801Dividend from subsidiaries (4,484,915) (3,386,929)(Profit) / Loss on sale of fixed assets (1,152,224) (71,222) 70,244,982 53,004,579Adjustments for: (19,666,157) (141,019,247)Increase/decrease in investmentsIncrease/decrease in advances (511,255,267) (552,112,941)Increase/decrease in borrowings 57,039,927 65,476,052Increase/decrease in deposits 654,270,149 652,643,939Increase/decrease in other assets (28,758,999) (36,704,232)Increase/decrease in other liabilities and 26,886,199 13,861,469provisions 178,515,85 2,145,040 2 (18,141,312) (8,620,283)Refund/(payment) of direct taxesNet cash generated from operating 230,619,52 46,529,336activities(A) 2Cash flow from investing activities
  • 68. Investments in subsidiaries and/or joint (15,758,166) (8,509,194)venturesIncome received on above investments 4,484,915 3,386,929Purchase of fixed assets (4,924,623) (5,474,001)Proceeds from sale of fixed assets 4,347,300 942,843(Purchase)/sale of held to maturity (171,776,134) (69,286,381)securitiesNet cash generated from investing (183,626,70 (78,939,804)activities(B) 8)Cash flow from financing activitiesProceeds from issue of share capital 2,074,414 79,813,833Net proceeds/(repayment) of bonds 160,717,380 869,592Dividend and dividend tax paid (8,646,021) (7,174,390)Net cash generated from financing 154,145,77 73,509,035activities(C) 4Effect of exchange fluctuation on (327,587) 3,955translation reserve(D)Net increase/(decrease) in cash and cash 200,811,00 41,102,522equivalents)(A+B+C+D) 1Cash and cash equivalents at 1st April 170,402,245 129,299,723Cash and cash equivalents at 31st March 371,213,247 170,402,245
  • 70. The balance-sheet along with the income statement is animportant tools for investors and many other parties who areinterested in it to gain insight into a company and its operation.The balance sheet is a snapshot at a single point of time of thecompany’s accounts- covering its assets, liabilities andshareholder’s equity. The purpose of the balance-sheet is to giveusers an idea of the company’s financial position along withdisplaying what the company owns and owes. It is importantthat all investors know how to use, analyze and read balance-sheet. P & L account tells the net profit and net loss of acompany and its appropriation.In the case of ICICI Bank, during fiscal 2007, the bankcontinued to grow and diversify its assets base and revenuestreams. Bank maintained its leadership in all main areas suchas retail credit, wholesale business, international operation,insurance, mutual fund, rural banking etc. Continuous increasein the number of branches, ATM and electronic channels showsthe growth take place in bank.
  • 71. Trend analysis of profit & loss account and balance sheetshows the % change in items of p & l a/c and balance sheet i.e.% change in 2006 from 2005 and % change in 2007 from 2006.It shows that all items are increased mostly but increase in thisyear is less than as compared to increase in previous year. In p& l a/c, all items like interest income, non-interest income,interest expenses, operating expenses, operating profit, profitbefore tax and after tax is increased but in mostly cases it isless than from previous year but in some items like interestincome, interest expenses, provision % increase is more. Someitems like tax, depreciation, lease income is decreased.Similarly in balance sheet all items like advances, cash,liabilities, deposits is increased except borrowings which isdecreased. % increase in some item is more than previous yearand in some items it is less.Ratio analysis of financial statement shows that bank’s currentratio is better than the quick ratio and fixed/worth ratio. Itmeans bank has invested more in current assets than the fixedassets and liquid assets. Bank have given more advances to itscustomer and they have less cash in their hand. Profitabilityratio of bank is lower than as compared to previous year.Return on equity is better than the return on assets.
  • 72. The cash flow statement shows that net increase in cashgenerated from operating and financing activities is much morethan the previous year but cash generated from investingactivities is negative in both year. There is increase of159,708,479 thousand RS. in Increase in cash & cashequivalents from previous year. Therefore analysis of cash flowstatement shows that cash inflow is more than the cash outflowin ICICI Bank.Thus, the ratio analysis and trend analysis and analysis ofcash flow statement shows that ICICI Bank’s financial positionis good. Bank’s profitability is increasing but not at high rate.Bank’s liquidity position is fair but not good because bankinvest more in current assets than the liquid assets. As we allknow that ICICI Bank is on the first position among all theprivate sector bank of India in all areas but it should payattention on its profitability and liquidity. Bank’s position isstable.
  • 74. Some of the recommendation and suggestion are as follows: o The attention is required on the areas of growth, profitability ,service level and building talent. o To increase the profit of bank, bank should decrease their operating expenses and increase their income. o To increase its liquidity, bank should keep some more cash in its hand instead of giving more and more advances. o Introduce quality consciousness and standardization of the work system and procedures. o Make manager competitive and introduce spirit of market-orientation and culture of working for customer satisfaction. o There is need to build the knowledge and skill base among the employees in the context of technology. o Performance measure should not only cover financial aspects i.e. quantitatively aspects but also the qualitative aspects. o It is high time to focus on work than the work-achieved. o Bank should increase its retail portfolio.
  • 75. o Bank should manage its all risk such as credit, market and operational risk properly and should be managed by a person who are highly skilled and qualified.Bank should pay attention on its subsidiary “ICICI Prudential Life InsuranceCompany Limited BIBLIOGRAPHYREFERENCE BOOKS  P.N. VARSHNEY “Banking Law And Practices” Sultan Chand & Sons  SUNDRAM & VARSHNEY “Banking, Theory Law And Practices” Sultan Chand & Sons  DR. S. N. MAHESHWARI “Principles Of Accounting” Sultan Chand & Sons WEBSITES   
  • 76. (I) PROFIT AND LOSS A/C For The Year Ended March 31,2007 (RS. IN ‘000S) PARTICULARS AS ON AS ON SCHE- 31.03.2007 31.03.2006 DULEI. INCOME Interest earned 13 229,942,916 143,061,325 Other income 14 59,291,686 41,808,859 289,234,602 184,870,184 TOTAL INCOMEII. EXPENDITURE Interest expended 15 163,584,984 95,974,483 Operating expenses 16 66,905,564 50,011,537 Provision and contingencies 17 27,641,854 13,483,417 258,132,402 159,469,437 TOTAL EXPENDITUREIII. PROFIT/LOSS Net profit for the year 31,102,200 25,400,747 Profit brought forward 2,934,416 1,882,221 TOTAL PROFIT/(LOSS) 34,036,616 27,282,221
  • 77. IV. APPROPRIATIONS/ TRANSFERS 7,800,000 6,360,000Transfer to Statutory reserveTransfer to reserve fund 1,168 222Transfer to capital reserve 1,210,000 680,000Transfer to investment fluctuation - 5,900,000reserveTransfer from investment fluctuation - (13,203,350)reserveTransfer to special reserve 4,500,000 2,750,000Transfer to revenue and other reserves - 13,203,350Proposed equity share dividend 9,011,694 7,593,326Proposed preference share dividend 35 35Corporate dividend tax 1,530,978 1,064,969Balance carried over to balance sheet 982,741 2,934,416 34,036,616 27,282,968 TOTAL 18Significant policies& notes to accounts EARNING PER SHARES Basic(rs.) 34.84 32.49 Diluted(rs.) 34.64 32.15 Face value per share(rs.) 10.00 10.00 (II) BALANCE-SHEET (Balance sheet of ICICI bank as on March 31,2007) (Rs. In ‘000’s)Particulars Schedule As on As on 31.03.2007 31.03.2006 (RS.) (RS.)CAPITAL & LIABILITIES 1 12,493,437 12,398,345CapitalReserve & Surplus 2 234,139,207 213,161,571
  • 78. Deposits 3 2,305,101,863 1,650,831,713Borrowings 4 512,560,263 385,219,136Other liabilities & provisions 5 382,286,356 252,278,777 3,446,581,126 2,513,889,542TOTAL CAPITAL &LIABILITIESASSETSCash and Balance with Reserve 6 187,068,794 89,343,737Bank Of IndiaBalances with banks and money at 7 184,1441452 81,058,508calls and short noticeInvestment 8 912,578,418 715,473,944Advances 9 1,958,655,996 1,461,631,089Fixed Assets 10 39,234,232 39,807,115Other Assets 11 164,889,234 126,575,149 3.446,581,126 2,513,889,542TOTAL ASSETSContingent Liabilities 12 5,629,594,060 3,950,336,655Bills for Collection 40,465,610 43,384,648Significant accounting policies and 18notes to accounts(The Schedule refer to above form an integral part of balance sheet)