ICICI Bank 2016 Annual Report Download - page 100

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Management’s Discussion & Analysis
Annual Report 2015-2016
Net interest income increased by 11.5% from ` 190.40 billion in scal 2015 to ` 212.24 billion in scal 2016 reecting an
increase of 11.1% in the average volume of interest-earning assets.
The yield on average interest-earning assets decreased by 29 basis points from 8.96% in scal 2015 to 8.67% in scal
2016. The cost of funds decreased by 32 basis points from 6.17% in scal 2015 to 5.85% in scal 2016. The interest
spread increased by 3 basis points from 2.79% in scal 2015 to 2.82% in scal 2016. Net interest margin increased
marginally by 1 basis point from 3.48% in scal 2015 to 3.49% in scal 2016.
The net interest margin on domestic operations decreased by 7 basis points from 3.90% in scal 2015 to 3.83% in scal
2016 primarily due to a decrease in the yield on interest-earning assets, offset, in part, by a decrease in the cost of funds.
The yield on interest-earning assets decreased primarily due to a decrease in the yield on advances and investments,
offset, in part, by an increase in the yield on other interest-earning assets. The cost of funds decreased primarily due to
a decrease in cost of term deposits and cost of borrowings.
Net interest margin of overseas branches increased from 1.65% in scal 2015 to 1.86% in scal 2016 primarily due to
a decrease in cost of funds. Cost of funds decreased primarily due to re-pricing/prepayment of high-cost borrowings.
The following table sets forth, for the periods indicated, the trend in yield, cost, spread and margin.
Fiscal 2015 Fiscal 2016
Yield on interest-earning assets 8.96% 8.67%
- On advances 9.95 9.47
- On investments1 7.87 7.61
- On SLR investments 8.01 7.84
- On other investments1 7.49 6.83
- On other interest-earning assets1 5.20 5.49
Cost of interest-bearing liabilities 6.17 5.85
- Cost of deposits 6.18 5.88
- Current and savings account (CASA) deposits 3.00 3.00
- Term deposits 8.25 7.86
- Cost of borrowings 6.16 5.77
Interest spread 2.79 2.82
Net interest margin 3.48% 3.49%
1. In accordance with the Reserve Bank of India circular dated July 16, 2015, investment in the Rural Infrastructure and Development
Fund and other related deposits has been re-grouped to line item ‘Others’ under Schedule 11 - Other Assets and interest on the
Rural Infrastructure and Development Fund and other related deposits has been re-grouped from line item ‘income on investments’
to ‘Others’. Accordingly, figures of the previous periods have been re-grouped to conform to the current year presentation.
The yield on average interest-earning assets decreased primarily due to the following factors:
The yield on average interest-earning assets decreased by 29 basis points from 8.96% in scal 2015 to 8.67% in
scal 2016 primarily due to a decrease in yield on advances and yield on investments, offset, in part, by an increase
in proportion of average advances in total interest-earning assets. The yield on average advances decreased by 48
basis points from 9.95% in scal 2015 to 9.47% in scal 2016 and yield on average investments decreased by 26
basis points from 7.87% in scal 2015 to 7.61% in scal 2016.
The yield on advances was impacted by an increase in non-performing assets during scal 2016, as interest income
is not accrued on non-performing assets. The yield on domestic advances decreased by 78 basis points from 11.85%
in scal 2015 to 11.07% in scal 2016 primarily due to the above and a reduction in the base rate by 65 basis points
during scal 2016. The yield on overseas advances decreased by 10 basis points from 4.44% in scal 2015 to 4.34%
in scal 2016. However, the overall yield on average advances decreased by 48 basis points from 9.95% in scal
2015 to 9.47% in scal 2016 reecting the positive impact of the increase in the proportion of domestic advances in
total advances.