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Updated: 22/06/2009 | 12:00 AM IST
ICICI Bank banks on cost-cutting initiatives
Capital Market
Monday, June 22, 2009 (New Delhi)
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Meanwhile, the BSE Sensex was up 36.27 points, or 0.25%, to 14,558.16.

On BSE, 7.99 lakh shares were traded in the counter. The scrip had an average daily volume of 38.30 lakh shares in the past one quarter.

The stock hit a high of Rs 747.80 and a low of Rs 720 so far during the day. The stock had hit a 52-week high of Rs 797 on 19 May 2009 and a 52-week low of Rs 252.75 on 6 March 2009.

The stock had underperformed the market over the past one month till 19 June 2009, falling 5.91% as compared to the Sensex's 1.54% gain. It had, however, outperformed the market in the past one quarter, soaring 111.11% as against the Sensex rise of 61.32%.

India's largest private-sector lender by market capitalisation has an equity capital of Rs 1113.32 crore. Face value per share is Rs 10.

The current price of Rs 743.45 discounts the company's year ended March 2009 EPS of Rs 33.76, by a PE multiple of 22.02.

Mumbai-based ICICI Bank has employed several cost cutting measures. According to a reports, the bank had five offices in Mumbai, of which two were back offices. It owns only one of these offices; the rest were taken on rent. The bank has now consolidated all its backoffice work groups into the building it owns.

Of the remaining four rented premises, one was taken on a long-term lease at a rate favourable to the bank. This office later accommodated people from the other three rented premises and the bank surrendered one complete office with very high rentals, saving the bank several lakh of rupees a month. A similar exercise was reportedly carried out across the top 10 cities, resulting in the benefits and advantages to the bank.

ICICI Bank has also started promoting the use of e-statements and e-forms to reduce use of paper. It is migrating from direct mailers to emails and cellphone texts. The bank has even reduced the thickness of the paper used in its offices. Overnight stays while travelling on work have been prohibited.

The bank has decided not to issue stock options to its employees and bonuses to its top management this year, and has given a 3% increment to all employees - lower than at least 10% raises in previous years. The report suggested that bank has maintained its policy on performance-based pay, but the quantum of the payout will change.

The bank's workforce had increased to 40,000 in 2008 from 27,000 in fiscal 2007. That has now decreased to 36,000 this year.

The bank is also reported to be rejigging its business model as a result, driving more of its consumer business through its branch network rather than through the external selling agents.

ICICI Bank recently cut its lending rates by 50 basis points from 5 June 2009. The benchmark advance rate, or the rate that it charges its top customers, was reduced to 15.75% from 16.25%. It also cut rates for retail customers by 50 basis points.

ICICI's net profit fell 35% to Rs 743.76 crore on a 11.4% decline in operating income to Rs 9203.36 crore in Q4 March 2009 over Q4 March 2008.

The net profit slipped 9.6% to Rs 3758.13 crore on a 2.3% fall in operating income to Rs 38696.27 crore in the year ended March 2009 over the year ended March 2008.

The bank's Q4 March 2009 net profit took a beating due to lower fee income, higher provisioning towards bad loans and an almost flat net interest income. The CASA (current account savings account) ratio improved to 28.7% in FY 2009 from 26.1% in FY 2008. As of 31 March 2009 bank's net non performing asset ratio was 1.96%.

ICICI Bank provides retail-banking, corporate banking, cash management and treasury management services.

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