ICICI Bank 2005 Annual Report Download - page 48

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46
Total interest income (excluding dividend) increased 4.8% to Rs. 93.29 billion in fiscal 2005 from Rs. 89.03
billion in fiscal 2004 primarily due to an increase of 17.7% in the average interest-earning assets to
Rs. 1,153.24 billion, offset, in part, by a decline of 1.0% in yield on interest-earning assets. Yield on average
interest-earning assets decreased to 8.1% in fiscal 2005 from 9.1% in fiscal 2004 primarily due to
origination of new loans at lower rates given the reduction in our average cost of funding, and reduction in
higher-yield loans made in earlier periods. Interest income is net of commissions paid to direct market
agents for automobile loans. While the yield on average advances declined 1.3% to 9.4% in fiscal 2005, the
yield on average investments declined 1.0% to 6.4% in fiscal 2005.
Total interest expense decreased 6.3% to Rs. 65.71 billion in fiscal 2005 from Rs. 70.15 billion in fiscal 2004,
primarily due to a decline of 1.3% in the cost of funds offset, in part, by a 15.0% increase in average
interest-bearing liabilities to Rs. 1,138.25 billion. Cost of funds decreased to 5.8% for fiscal 2005 from 7.1%
for fiscal 2004 primarily due to the increased proportion of deposits in ICICI Bank’s funding on account of
repayments of higher cost borrowings of ICICI as well as a reduction in the cost of deposits to 4.5% from
5.4%. Total deposits at March 31, 2005 constituted 70.5% of ICICI Bank’s funding (comprising deposits,
borrowings and subordinated debts) compared to 63.1% at March 31, 2004.
As a result of the 1.3% decline in the cost of funds, offset, in part by a 1.0% decline in yield on average
interest-earning assets, net interest margin increased to 2.4% for fiscal 2005 from 1.9% for fiscal 2004. Net
interest margin is, however, expected to continue to be lower than other banks in India until the borrowings
of ICICI are repaid. The net interest margin is also impacted by the relatively lower net interest margin
earned by overseas branches, which is offset by the higher fee income that the Bank is able to earn by
leveraging its international presence and its ability to meet the foreign currency borrowing requirements
of Indian companies.
Fee income
Fee income increased by 78.6% to Rs. 20.98 billion in fiscal 2005 from Rs. 11.75 billion in fiscal 2004
primarily due to growth in fee income from retail products and services, including fees arising from retail
asset products like home loans and credit cards and retail liability-related income like account servicing
charges, and an increase in transaction banking fee income from corporate clients. During fiscal 2005,
retail banking operations contributed about 54.8% of total fee income, corporate banking operations
contributed 38.1% and international operations contributed the balance 7.1%. Fee income includes
merchant foreign exchange income amounting to Rs. 1.77 billion in fiscal 2005 and Rs. 0.90 billion in fiscal
2004.
Lease & other income
Lease income (including profit/ (loss) on sale of leased assets) decreased by 5.0% to Rs. 4.01 billion in fiscal
2005 from Rs. 4.22 billion in fiscal 2004 mainly due to a reduction in lease assets since ICICI Bank is not
entering into new lease transactions. ICICI Bank’s total lease assets were Rs. 14.53 billion at March 31, 2005
compared to Rs. 16.63 billion at March 31, 2004. Other income increased by 33.8% to Rs. 2.06 billion for
fiscal 2005 compared to Rs. 1.54 billion for fiscal 2004, primarily due to higher dividend income from
subsidiaries.
Management’s Discussion & Analysis
Dickenson Tel: 022-2625 2282