Transformation of ICICI into retail financial conglomerate

Abstract

One of the most successful financial institutions in India is ICICI Bank. ICICI Bank has its origins from Industrial Credit and Investment Corporation of India (ICICI) which was established in 1955 as a Development Finance Institution. ICICI has long history and a successful one too. ICICI Bank (ICICI, or the company) is a diversified financial services company that provides a range of banking and financial services to customers, including retail banking, project and corporate finance, working capital finance, insurance, venture capital and private equity, investment banking, broking, and treasury products and services. The company operates in, India, the UK, Canada and Russia. It is headquartered in Mumbai, India and employs 34,596 people. The company recorded revenues of INR641.5 billion ($14 billion) in the financial year ended March 2009 (FY2009), an increase of 6.8% over 2008. The net profit was INR35.8 billion ($0.8 billion) in FY2009, an increase of 5.3% over 2008. ICICI is diversified financial services company that provides a range of banking and financial services to customers, including retail banking, project and corporate finance, working capital finance, insurance, venture capital and private equity, investment banking, broking, and treasury products and services. The company operates in, India, the UK, Canada and Russia. It operates in eight segments: treasury, wholesale banking, retail banking, life insurance, other banking business, general insurance, venture fund management and others. Treasury includes the entire investment portfolio of the bank, ICICI eco-net internet and technology fund, ICICI equity fund, ICICI emerging sectors fund and ICICI strategic investments fund. Additionally, treasury services are provided in Hong Kong, Sri Lanka, Bahrain, and Singapore through the offshore banking unit (a business unit) in Mumbai. Wholesale banking includes all advances to trusts, partnership firms, companies and statutory bodies which are not included under the retail banking. The division offers products for middle market companies and small and medium enterprises include loan products, fee and commission-based products and services, deposits and foreign exchange, and derivatives products. ICICI also provides supply chain financing, including financing of selected customers of corporate clients. The segment provides medium-term and long-term project and infrastructure financing, securitization, factoring, lease financing, cash management services, custodial services, working capital finance and foreign exchange services. The investment banking division provides treasury services including corporate advisory services, primary dealership in government securities and equity underwriting and brokerage. These services are provided by its subsidiaries, ICICI Bank UK, ICICI Bank Canada and ICICI Bank Eurasia, and the operations of ICICI Securities Primary Dealership (formerly ICICI Securities), ICICI Securities (formerly ICICI Brokerage Services), ICICI Securities, and ICICI Securities Holdings. Retail banking comprises the retail liabilities, retail assets and small enterprises businesses. Consumer banking provides deposit and loan products to retail customers, credit cards, private banking, depositary share accounts in India, distribution of third party investment products and other fee-based products and services, as well as issuance of unsecured redeemable bonds. ICICI offers different types of loans including home loans, automobile loans, commercial business loans (including primarily commercial vehicle loans), and personal loans, loans against time deposits and loans against securities to its retail customers. The bank has 1,419 branches and extension counters as well as 4,713 ATM’s as of March 31, 2009. ICICI’s total retail portfolio was 1,062.03 billion at March 31, 2009, constituting 49% of total loans. ICICI has expanded internationally to focus on customers of Indian origin. ICICI currently operates in 18 countries and has subsidiaries in Canada, Russia and the United Kingdom, branches in Bahrain, Dubai, Hong Kong, Qatar, Singapore, Sri Lanka, and the United States and representative offices in Bangladesh, China, South Africa, and the United Arab Emirates. The subsidiary in the United Kingdom has established branches in Antwerp, Belgium and Frankfurt, Germany. ICICI has over 500,000 NRI customers and a market share of 25% in inward remittances to India. ICICI provides support to Indian companies in raising corporate and project finance for their investments abroad as well as foreign currency financing for their investments in India, trade finance, personal financial services for non-resident Indians and development of a retail deposit franchise using the internet, branch and broker channels. This division also offers agricultural and rural banking products through corporate banking products and services to corporate clients engaged in agriculture-linked businesses. The rural credit products for individuals and households include loans to farmers for cultivation, post-harvest financing against warehouse receipts, loans for purchase of tractors, working capital for trading and small enterprises, loans against jewellery and micro-finance loans for various purposes. Life insurance is provided through subsidiary, ICICI Prudential Life Insurance Company. Life insurance business primarily comprises unit-linked life insurance and pension products. ICICI Prudential also provides micro insurance services which have promoted financial security among the rural poor and improved their ability to avail credit facilities for undertaking income generating activities. Other banking business includes hire purchase and leasing operations, gain/loss on sale of banking and nonbanking assets and other items not attributable to any particular business segment. Further it also includes the bank's banking subsidiaries i.e. ICICI Bank UK, ICICI Bank Canada and its subsidiary, namely, ICICI Wealth Management and ICICI Bank Eurasia. General insurance is provided through ICICI Lombard General Insurance Company range of non-life insurance products, including health, weather and cattle insurance. ICICI Venture Funds Management Company manages funds that provide venture capital funding to start-up companies and private equity to a range of companies. As of March 31, 2009, it had funds under management of about INR97.87 billion. The other division consists of the following a range of financial services provided by asset management, trust services and property through partnerships. ICICI Securities and ICICI Securities Primary Dealership are engaged in equity underwriting and brokerage and primary dealership in government securities respectively. ICICI Securities has an online share trading portal called icicidirect.com. The primary objective of icicidirect.com is to enable individuals to make investments and offer a wide range of investment options by providing a seamless structure that integrates a customer’s bank account, demat account and trading account. The portal offers seamless access to the United States markets by tying up with a leading United States based broker. The division also includes prominent joint ventures and partnerships include ICICI Home Finance Company, ICICI International, ICICI Prudential Asset Management Company, ICICI Prudential Trust, ICICI Property Trust, ICICI Investment Management Company, ICICI Trusteeship Services, TCW/ICICI Investment Partners, TSI Ventures (India) Private, ICICI Kinfra, ICICI West Bengal Infrastructure Development Corporation, Financial Information