Icici Bank

Table of Contents
Rpt. 13267742 19-Mar-2008
ICICI BANK JEFFERIES & COMPANY, INC. - CHATTERJEE, ANINDYA
2-8
Rpt. 13260434 17-Mar-2008
ICICI BANK EDELWEISS CAPITAL LIMITED - GOYAL, VISHAL, ET AL
9 - 12
Rpt. 13243991 13-Mar-2008
ICICI BANK - INITIATING COVERAGE BNP PARIBAS SECURITIES (ASIA) - SARATHI, VIJAY, ET AL
13 - 40
These reports were compiled using a product of Thomson Financial.
www.thomson.com/financial
March 19, 2008 Financial Services Consumer Finance India
ICICI Bank (NYSE: IBN)

Huge Investment Provisioning to Hurt Earnings: Downgrade to Underperform
Investment Summary
IBN's (Marked-to-Market) MTM losses must have widened sharply in Feb./Mar., and we see little respite ahead amid continuing negative global headwinds. ICICI bank's management last week clarified that the bank had US$2.2bn overseas CDO exposure, and that the MTM losses were at US$264mn as of Jan. 31, 2008.
UNDERPERFORM BUY $39.56 $29.00 $87.00 2:1 NYSE: IBN
Rating Change Price Target Change Estimate Change

Rating: Previous: Price: Price Target: Previous: ADR Ratio: Bloomberg:
Event
We are downgrading IBN to Underperform with a revised price target of US$29/ADR (INR590/local share). We expect ICICI bank's 4QFY2008 earnings to disappoint the market with a 97% YoY, and 98% sequential (QoQ) decline in profits, due to significant MTM deterioration of its overseas investment portfolio.
Key Points
ICICI Bank along with its subsidiaries has significantly increased balance sheet exposure to global financial markets. On a standalone basis - market-linked global credit exposures top 8.4% of the bank's total investment book - significantly changing the bank's risk profile and balance sheet character from previous years when such exposures were negligible, in our view. ICICI Bank may need to provide more than US$300mn in MTM losses on its US$2.2bn CDO/CDS/CLS exposures in 4QFY2008, in our view, over and above the US$264mn loss provisions already announced earlier this month. The bank has around US$600mn CDO exposure and around US$1.6bn exposure in credit derivatives. Two-thirds of the underlying securities comprise of overseas bonds of Indian companies. The remaining one-third underlying exposure is on US and EU investment grade corporate bonds. Our estimates conservatively incorporate the significant value erosion in global credit markets in Feb./Mar. 2008, and the deterioration in credit market liquidity with widespread rise in risk aversion. Further, the bank's UK and Canada subsidiaries have more than $4bn combined exposure in Asset Backed Securities (ABS), Prime Mortgage Backed Securities (MBS), Asset Backed Commercial Papers, etc. Losses and provisions on these will adversely impact the bank's consolidated earnings. Our revised model also incorporates a modest deceleration in the bank's asset growth - both on domestic and overseas businesses. On the domestic advances we envisage higher delinquencies on personal/farm sector loans. The bank has around INR4.5bn (US$1.1bn) of such loan exposure.
Market Data
52-Week Range: Total Entprs. Value (MM): Market Cap. (MM): Institutional Ownership: Shares Out. (MM): Float (MM): Avg. Daily Vol.: $74.25-$33.67 $33,094.1 $21,659.1 86.2% 547.5 547.5 2,627,019
Financial Summary
Book Value (MM): Book Value/Share: Net Debt (MM): Return on Avg. Equity: Net Debt/Capital: Dividend Yield: Cash & ST Investments (MM): $11581.2 $20.60 $11435.0 8.6% 98.7% 1.3% $9,140.0
USD Rev. (MM) Prev. EV/Rev. EPS FY Mar Prev. FY FY P/E
2006A 2007A 2008E 2009E 2007.0 2797.0 3709.0 5008.2 --- 4284.0 6051.0 16.5x 11.8x 8.9x 6.6x 1.45 -27.3x 1.54 -25.7x 1.36 2.06 29.1x 1.21 3.03 32.7x
Anindya Chatterjee (212) 284-3490, achatterjee@jefferies.com
Valuation/Risks
Our IBN price target is based on P/B. At our price target the bank would quote at a marginal discount to the valuation of local state owned banks and at a considerable (>50%) discount to local private sector banks, and incorporates the ongoing global value compression on the financial sector. At our price target of US$29 and INR590, IBN would quote at 1.3x Mar. 2009 earnings. A rapid recovery in global financial markets poses risks to our bearish call.
Please see important disclosure information on pages 5 - 7 of this report.
(NYSE:IBN)
Company Description
ICICI Bank is India's largest bank by market capitalization. It is also the second-largest bank in terms of total assets. Its parent company ICICI was formed in 1955 at the initiative of the World Bank, the Government of India and representatives of Indian industry. In 1999, ICICI become the first Indian company and the first bank or financial institution from non-Japan Asia to be listed on the NYSE. Later in October 2001, ICICI was merged to its subsidiary ICICI Bank. ICICI Bank has a network of about 950 branches and 3,300 ATMs in India and presence in 17 countries. ICICI Bank offers a wide range of banking products and financial services to corporate and retail customers through a spectrum of delivery channels and through its specialized subsidiaries and affiliates in the areas of investment banking, life and non-life insurance, venture capital and asset management.

Anindya Chatterjee , achatterjee@jefferies.com, (212) 284-3490
Page 2 of 7
(NYSE:IBN)
Table 1: IBNs Investment Exposure in Overseas Markets (approximate figures)
Amount
US$2.2bn
Investing entity
ICICI Bank, India
Investment Mode/Vehicle
US$600mn in CDOs US$1.6bn in CDS/CLS 67% in overseas debt instruments of Indian companies 33% in debt instruments of US/EU companies, and some in Asian companies US2.4bn in overseas bank bonds, rest invested in ABS, UK Prime MBS (US$600mn) 85% invested in A- to AAA category 35% in Govt bonds 45% in Bankers Acptance 80mn in Asset Backed CPs Rest in misc. debt securities
US$3.3bn
ICICI Bank, UK
US$600mn
ICICI Bank, Canada
Source: Company data; Jefferies Research
Table 2: IBN - Income Statement & Estimate Variance Analysis

Income Statement US$ Million Net interest income Fee income Other non interest income Operating income Operating Expenses Depreciation Provisions and Contingencies Total Expense Operating Profit For The Year Provision For Taxes Net Income Earnings per ADR (US$) OLDFY2008E NEWFY2008E 2,001.8 1,663.1 618.9 4,283.9 1,921.4 162.3 784.8 2,868.5 1,415.3 255.7 1,159.6 2.06 1,471.5 1,630.7 606.8 3,709.0 1,888.6 159.1 719.3 2,767.1 942.0 178.7 763.3 1.36 Variance OLDFY2009F -26% -2% -2% -13% -2% -2% -8% -4% -33% -30% -34% -34% 2,602.4 2,392.4 1,055.8 6,050.5 2,430.0 188.5 1,380.8 3,999.4 2,051.2 346.4 1,704.7 3.03 NEWFY2009F 1,525.5 2,416.4 1,066.4 5,008.2 2,449.5 190.4 1,547.3 4,187.2 821.0 139.3 681.7 1.21 Variance -41% 1% 1% -17% 1% 1% 12% 5% -60% -60% -60% -60%
Table 3: IBN Capital raised in 2H2007

Capital raised by IBN in FY2007/08 - ADR Offering Yen denominated loan Senior unsecured notes US commercial paper Total Source: Company data; Jefferies Research US$bn 2.5 1.5 2.0 0.5 6.5 Equity Capital - Secondary Offering (Local + ADR): US$6bn

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(NYSE:IBN)
Table 4: IBN - Balance Sheet

Balance Sheet US$ Million Shareholders Equity -Capital -Reserves And Surplus Liabilities -Deposits growth -Borrowings growth -Other Liabilities And Provisions Total Capital And Liabilities Assets Cash And Balance With Reserve Bank Of India Investments growth Advances growth Fixed Assets Other Assets Total Assets Average Earning Assets (US$ Million) Book value of ADR (US$) Source: Company data; Jefferies Research 2,017.1 16,153.2 43% 32,999.0 62% 898.7 2,857.7 56,755.7 38,844.9 11.2 4,164.1 4,099.0 20,313.7 26% 43,599.0 32% 873.3 3,670.6 76,719.6 57,374.7 12.0 5,522.3 3,617.9 30,391.6 0.5 58,745.2 0.3 1,027.0 5,253.4 104,557.2 86,743.2 20.6 6,610.5 6,966.5 36,404.5 0.2 84,402.6 0.4 1,166.6 5,618.0 141,168.7 120,620.1 22.9 Balances With Banks And Money At Call And Short Notice 1,830.0 FY2006A 5,092.4 279.9 4,812.5 51,663.3 37,270.6 67% 10,987.3 18% 3,405.4 56,755.7 FY2007A 5,490.0 278.1 5,211.9 71,229.7 51,310.7 38% 15,728.9 43% 4,190.0 76,719.6 FY2008E 11,581.2 368.5 11,212.7 92,976.1 67,536.9 0.3 20,574.8 0.3 4,864.4 104,557.2 FY2009F 12,855.6 394.1 12,461.5 128,313.0 93,344.9 0.4 28,226.3 0.4 6,741.8 141,168.7
Table 5: IBN - Quarterly and Annual Income Statement

Income Statement (INRmn) Income Interest Earned Other Income -Fee income -Others Total Income Expenditure Interest Expense Net Interest Income Operating Expenses Depreciation and amortisation Provisions And Contingencies Total Expenditure Operating Profit For The Year Provision For Taxes Net Income Earning per Share (in Rupees) B Basic B Diluted 8.61 8.54 9.13 9.08 11.07 10.99 0.18 0.18 27.23 26.91 4.33 4.27 8.11 8.02 5.90 5.83 4.41 4.36 22.74 22.48 58,518.8 17,142.5 17,527.7 1,525.5 5,522.7 83,094.7 9,719.5 1,968.7 7,750.8 57,304.7 17,860.0 18,150.6 1,557.4 6,444.9 83,457.6 12,426.5 2,400.5 10,026.0 59,520.8 19,596.9 19,681.9 1,594.2 7,603.4 88,400.3 14,983.3 2,681.2 12,302.1 62,888.8 3,779.6 19,567.4 1,636.0 8,967.0 93,059.2 241.7 39.0 202.7 303,427.0 56,594.1 90,871.3 7,064.3 57,402.8 458,765.3 37,371.0 7,089.4 30,281.6 67,143.3 16,860.8 20,157.5 1,682.8 14,350.7 103,334.3 5,704.4 894.6 4,809.8 70,595.3 17,991.4 22,281.9 1,734.8 14,350.7 108,962.6 10,917.3 1,897.3 9,020.0 78,247.5 12,260.2 23,366.2 1,792.0 14,350.7 117,756.4 7,956.1 1,398.8 6,557.3 87,440.9 9,481.7 25,065.8 1,854.7 14,350.7 128,712.1 5,879.6 977.4 4,902.3 303,427.0 56,594.1 90,871.3 7,064.3 57,402.8 458,765.3 30,457.4 5,168.0 25,289.3 75,661.3 17,152.9 14,280.0 2,872.9 92,814.2 75,164.7 20,719.4 14,860.0 5,859.4 95,884.1 79,117.7 24,265.9 17,850.0 6,415.9 103,383.6 66,668.4 26,632.5 17,705.6 8,926.8 93,300.9 296,612.1 88,770.7 64,695.6 24,075.0 385,382.8 84,004.1 25,034.5 19,495.2 5,539.3 109,038.7 88,586.7 31,293.2 20,157.2 11,136.0 119,879.8 90,507.7 35,204.8 23,408.0 11,796.8 125,712.5 96,922.5 37,669.1 26,581.6 11,087.5 134,591.7 360,021.0 129,201.7 89,642.0 39,559.7 489,222.7 1QFY2008 2QFY2008 3QFY2008 4QFY2008E FY2008E 1QFY2009F 2QFY2009F 3QFY2009F 4QFY2009F FY2009F

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(NYSE:IBN)
ANALYST CERTIFICATIONS
I, Anindya Chatterjee, certify that all of the views expressed in this research report accurately reflect my personal views about the subject security(ies) and subject company(ies). I also certify that no part of my compensation was, is, or will be, directly or indirectly, related to the specific recommendations or views expressed in this research report.
Important Disclosures
As is the case with all Jefferies employees, the analyst(s) responsible for the coverage of the financial instruments discussed in this report receive compensation based in part on the overall performance of the firm, including investment banking income. We seek to update our research as appropriate, but various regulations may prevent us from doing so. Aside from certain industry reports published on a periodic basis, the large majority of reports are published at irregular intervals as appropriate in the analyst's judgement.
Meanings of Jefferies & Company, Inc, Ratings

Buy - Describes stocks that we expect to provide a total return (price appreciation plus yield) of 15% or more within a 12-month period. Hold - Describes stocks that we expect to provide a total return (price appreciation plus yield) of plus or minus 15% within a 12-month period. Underperform - Describes stocks that we expect to provide a total negative return (price appreciation plus yield) of 15% or more within a 12-month period. Our focus on mid-capitalization and growth companies implies that many of the companies we cover are typically more volatile than the overall stock market, which can be amplified for companies with an average stock price consistently below $10. For companies in this category only, the expected total return (price appreciation plus yield) for Buy rated stocks is 20% or more within a 12-month period. For Hold rated stocks with an average stock price consistently below $10, the expected total return (price appreciation plus yield) is plus or minus 20% within a 12-month period. For Underperform rated stocks with an average stock price consistently below $10, the expected total return (price appreciation plus yield) is minus 20% within a 12-month period. NR - The investment rating and price target have been temporarily suspended. Such suspensions are in compliance with applicable regulations and/or Jefferies & Company, Inc. policies. CS - Coverage Suspended. Jefferies & Company, Inc. has suspended coverage of this company. NC - Not covered. Jefferies & Company, Inc. does not cover this company. Restricted - Describes issuers where, in conjunction with Jefferies engagement in certain transactions, company policy or applicable securities regulations prohibit certain types of communications, including investment recommendations. Monitor - Describes stocks whose company fundamentals and financials are being monitored, and for which no financial projections or opinions on the investment merits of the company are provided.
Valuation Methodology
Jefferies' methodology for assigning ratings may include the following: market capitalization, maturity, growth/value, volatility and expected total return over the next 12 months. The price targets are based on several methodologies, which may include, but are not restricted to, analyses of market risk, growth rate, revenue stream, discounted cash flow (DCF), EBITDA, EPS, cash flow (CF), free cash flow (FCF), EV/EBITDA, P/E, PE/growth, P/CF, P/FCF, premium (discount)/average group EV/EBITDA, premium (discount)/average group P/E, sum of the parts, net asset value, dividend returns, and return on equity (ROE) over the next 12 months.
Risk which may impede the achievement of our Price Target

This report was prepared for general circulation and does not provide investment recommendations specific to individual investors. As such, the financial instruments discussed in this report may not be suitable for all investors and investors must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Past performance of the financial instruments Please see important disclosure information on pages 5 - 7 of this report.
Page 5 of 7
(NYSE:IBN) recommended in this report should not be taken as an indication or guarantee of future results. The price, value of, and income from, any of the financial instruments mentioned in this report can rise as well as fall and may be affected by changes in economic, financial and political factors. If a financial instrument is denominated in a currency other than the investor's home currency, a change in exchange rates may adversely affect the price of, value of, or income derived from the financial instrument described in this report. In addition, investors in securities such as ADRs, whose values are affected by the currency of the underlying security, effectively assume currency risk.
Rating and Price Target History for: ICICI Bank Limited (IBN) as of 03-18-2008
07/13/07 I:B:$62 01/16/08 B:$87
75 60 45 30 15 0 2008
Q1
Q2
Q3 2006
Q1
Q2
Q3 2007
Q1
Q2
Q3
Created by BlueMatrix
Distribution of Ratings
IB Serv./Past 12 Mos.
Rating Count Percent Count Percent
BUY [BUY/ SB] HOLD [HOLD] SELL [SU/ UNPF]
516 321 20
60.21 37.46 2.33
61 25 3
11.82 7.79 15.00
OTHER DISCLOSURES
This material has been prepared by Jefferies & Company, Inc. a U.S.-registered broker-dealer, employing appropriate expertise, and in the belief that it is fair and not misleading. The information upon which this material is based was obtained from sources believed to be reliable, but has not been independently verified, therefore, we do not guarantee its accuracy. Additional and supporting information is available upon request. This is not an offer or solicitation of an offer to buy or sell any security or investment. Any opinion or estimates constitute our best judgment as of this date, and are subject to change without notice. Jefferies & Company, Inc. and Jefferies International Limited and their affiliates and their respective directors, officers and employees may buy or sell securities mentioned herein as agent or principal for their own account.
Additional information for UK and Canadian investors

This material is approved for distribution in the United Kingdom by Jefferies International Limited which is authorized and regulated by the Financial Services Authority ("FSA"). While we believe this information and materials upon which this information was based are accurate, except for any obligations under the rules of the FSA, we do not guarantee its accuracy. This material is intended for use only by persons who have professional experience in matters relating to investments falling within Articles 19(5) and 49(2)(a) to (d) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (as amended) or to persons to whom it can be otherwise lawfully distributed. For Canadian investors, this material is intended for use only by professional or institutional investors. None of the investments or investment services mentioned or described herein are available to other persons or to anyone in Canada who is not a "Designated Institution" as defined by the Securities Act (Ontario).

Page 6 of 7
(NYSE:IBN) This material does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Clients should consider whether any advice or recommendation in this report is suitable for their particular circumstances and, if appropriate, seek professional advice, including tax advice. The price and value of the investments referred to herein and the income from them may fluctuate. Past performance is not a guide to future performance, future returns are not guaranteed, and a loss of original capital may occur. Fluctuations in exchange rates could have adverse effects on the value or price of, or income derived from, certain investments. Jefferies & Company, Inc. research reports are disseminated and available primarily electronically, and, in some cases, in printed form. Electronic research is simultaneously available to all clients. This report or any portion hereof may not be reprinted, sold or redistributed without the written consent of Jefferies & Company, Inc. Jefferies International Limited has adopted a conflicts management policy in connection with the preparation and publication of research, the details of which are available upon request in writing to: The Compliance Officer, Jefferies International Limited, Vintners Place, 68 Upper Thames Street, London EC4V 3BJ; telephone +44 (0)20 7029 8000; facsimile +44 (0)20 7029 8010.
2008 Jefferies & Company, Inc,

Page 7 of 7
India Equity ICICI Bank Research | Banking
Event Update
ICICI BANK
Difference in prudence
INR 757
BUY
Prudential Plc declared its full year results for CY07 on March 14, 2008 and reported a sharp decline in pretax new business achieved profits (NBAP) margins from 23% in CY06 to 12% in CY07 for the Indian operations. ICICI Prudential Life held an unscheduled conference call to address this wide variance in NBAP margins (pretax) reported by Prudential Plc for its Indian operations at 13% for CY07 and ICICI Bank (post tax) at 19% for 9MFY08. Table 1: New business margins for Prudentials Asian operations
New business margins (%) CY07 Hong Kong Korea Taiwan India China Other Weighted average for Asian operations
Source: Prudential Plc
Vishal Goyal, CFA +91-22-2286 4370 vishal.goyal@edelcap.com Ajitesh Nair +91-22-4009 4535 ajitesh.nair@edelcap.com March 17, 2008
CY06 69 35 55 23 43 72 54
73 37 58 12 50 61 50
We believe there are three primary reasons for this difference Results prepared on the basis of European embedded value principles
Reuters : : ICBK.BO ICICIBC IN
Prudential Plcs CY07 results are prepared on the basis of European embedded value principles. Accordingly, Prudential Plc has considered a larger part of expenses incurred in more than doubling its branch network to 1070 and agency force to 238,000 upfront, while calculating margins on new business premiums. However, ICICI Prudential Life reports NBAP margins on an achieved profit framework considering steady state long term expense ratio and amortises its branch roll out expenses, giving their branches time to achieve productivity gains and other benefits. Generally, insurance companies incur three types of expenses-
Bloomberg
Market Data 52-week range (INR) Share in issue (mn) M cap (INR bn/USD mn) Avg. Daily Vol. BSE (000) : : 1,465 / 719 1,112.5
: 932.3 / 20,810 : 3,331.2
Share Holding Pattern (%)
1. 2. 3.
Expenses to generate the current years business (commission etc); Expenses for future business (marketing cost etc); Expenses on branch rollout (establishment expenses). ICICI Prudential Life is amortising these expenses, while Prudential Plc is accounting for them upfront.
Promoters MFs, FIs & Banks FIIs Others
: : : :
0.0 16.9 40.0 43.1
Excerpts from the FY07 results of Prudential Plc (schedule 5)
The negative expense variances in China and India are primarily a reflection of the expenses for new business being in excess of the target levels factored into the valuation of new business for these operations which are at a relatively early stage of development. On the basis of current plans, the target levels for India and existing China operations are planned to be attained in 2011
Edelweiss Research is also available on Bloomberg EDEL <GO>, Thomson First Call, Reuters and Factset.
ICICI Bank
As mentioned in Prudential Plcs report, on the basis of current expansion plans, the management expects both the reported NBAP margins (12% and 19%) to converge over three years as the company moves closer to break even. There is also a difference in economic assumptions used by Prudential Plc and ICICI Bank (which is in public domain) Table 2: Difference in economic assumptions
Prudential Inc CY07 Discount rate Equity return Inflation Cash return Bond return New Business Margins
Source: Prudential Plc, Company
ICICI Bank CY06 16.5 NA 5.5 NA 10.5 23.0 13.3 13.3 5.5 7.0 8.0 19.3
Impact due to the difference Lower margin for Prudential Lower margin for Prudential Higher margin for Prudential Higher margin for Prudential Higher margin for Prudential
Extent of impact High Medium Low Low Low
15.8 12.8 5.0 8.5 9.3 12.0
Increasing proportion of lower margin products Nearly 4% decline in NBAP margins reported by Prudential Plc in CY07 over CY06 was on account of revised Insurance regulatory and Development Authority (IRDA) guidelines for unit linked products and increasing proportion of low-margin products. This was also the key reason for ICICI Prudential Life reporting a decline in its NBAP margins from 23% in FY07 to 19% for 9mFY08. The company is planning to sell high-margin health insurance products aggressively in the coming years. How does it affect valuations for ICICI Pru Life Insurance? The difference in reported margins is alarming, and could add further disbelief to the already less believed number of NBAP margin. Expense overruns would have an impact on the current year NBAP margin and embedded value (currently not disclosed by Indian companies). Also, due to shift in product portfolio and ongoing expansion, pressure on margins will continue. Other highlights The company is likely to break even in 2011. The branch network more than doubled to ~1070 branches in the last one year. Capital infusion of USD 100 mn in Q4FY08. Concerns on ICICI Bank Increase in credit spreads on global banks would impact MTM losses of ICICI Bank, more significantly than anticipated earlier. Investment of ~USD 2 bn from the UK subsidiaries is in global banks debt papers, where spreads have moved up wildly in the last one month. Since January 2008, the average CDS spreads (5 year) on global banks bonds have moved up by more than 120bps, which is similar to the increase seen in first ten months (April 2007 to January 2008). Hence, additional MTM losses on the UK subsidiaries book can be expected. Concerns over MTM losses on foreign currency derivatives contracts still persists on the bank.
10
ICICI Bank
Valuations: SOTP offers upside; near-term headwinds persist We are revising our fair value estimate of its banking business from INR 875 per share to INR 635 per share due to concerns on MTM losses on credit derivatives and possible losses on forex derivative products. Our revised SOTP stands at INR 1023 per share on FY09E estimates. Adjusting for the value of subsidiaries, the stock is currently trading at 1.0x FY09E book and 9.4x FY09E earnings. We are reducing our estimates for the life insurance business from INR 325 per share to INR 279 per share to factor in lower margins and lower premium growth. We maintain Buy due to attractive valuations, while we anticipate headwinds to limit performance in the near term.
11
ICICI Bank
Edelweiss Securities Limited, 14th Floor, Express Towers, Nariman Point, Mumbai 400 021, Board: (91-22) 2286 4400, Email: research@edelcap.com
Naresh Kothari Vikas Khemani Shriram Iyer Co-Head Institutional Equities Co-Head Institutional Equities Head Research naresh.kothari@edelcap.com vikas.khemani@edelcap.com shriram.iyer@edelcap.com +91 22 2286 4246 +91 22 2286 4206 +91 22 2286 4256
Coverage group(s) of stocks by primary analyst(s): Banking and Financial Services:

Allahabad Bank, Axis Bank, Centurion Bank of Punjab, Federal Bank, HDFC Bank, ICICI Bank, IOB, Karnataka Bank, Kotak Mahindra Bank, OBC, SBI, Yes Bank, IDFC, HDFC, LIC Housing Finance, PNB, Power Finance Corporation, Reliance Capital, SREI Infrastructure Finance, Shriram City Union, Syndicate Bank and Union Bank.
ICICI Bank
1500 1340 (INR) 1180 1020 860 700 Mar-07 Buy Apr-07 Redc Sep-07 Oct-07 Nov-07 Dec-07 Jun-07 Jul-07 Jan-08 Feb-08 May-07 Aug-07 Mar-08 Accm Accm Accm Buy Buy
Recent Research
Date
4-Mar-08
Company
Banking
Title
Price (INR)
Recos
Near term headwinds offset valuations comfort (SOBs)
Sector Update
3-Mar-08 BFSI Budget talks; market reacts;
Fortnightly
25-Feb-08 HDFC Bank When Harry met Sally; 1,422 90-105 Buy Subscribe
Event Update
18-Feb-08 REC Valuations comfortable; returns limited;
Result Update
Distribution of Ratings / Market Cap

Edelweiss Research Coverage Universe Buy
Rating Distribution* 110
Rating Interpretation
Rating Expected to
appreciate more than 20% over a 12-month period appreciate up to 20% over a 12-month period depreciate up to 10% over a 12-month period depreciate more than 10% over a 12-month period
Accumulate
49
Reduce
10
Sell
1
Total
190
Buy Accumulate
* 14 stocks under review / 6rating withheld
> 50bn
Market Cap (INR) 96
Between 10bn and 50 bn

70
< 10bn
24
Reduce Sell
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12
ICICI Bank
Vijay Sarathi (91 22) 6650 1677
S O W H A T ? T H E B N P
ICICIBC IN Initiation 13 March 2008

A N G L E S E C T O R :
Target Price . INR1,410.00
India Financials/Banks
P A R I B A S
O V E R W E I G H T
Our target price implies an upside of 58% from the current price. We believe the stock correction in the recent sell off is overdone. EPS expansion of 22% on 27% growth in corporate loans and 12% growth in retail loans.
Net Profit 09....... INR54.5b
BUY
Recs in the Market Positive.....................................28 Neutral........................................4 Negative .....................................3 Consensus (momentum) ..........
Diff from Consensus..(1.5%) Consensus (mean) ........INR55.3b Consensus (momentum) ..........
Diff from Consensus..(0.4%) Consensus (median) INR1,416.00 Consensus (momentum) .......... Current Price.... INR893.40 Upside/ (Downside)............ 57.8%
Sources: Thomson One Analytics; Bloomberg; BNP Paribas estimates
Initiate with a BUY and TP of INR1,410. ICICIs corporate loan book to grow by 27% over FY08-11 on the back of USD750b outlay of corporate capex. Retail loan book to grow at 12%. EPS to grow 22% and fee incomes 30-40% by FY10. Its impressive balance sheet, scale and loan franchise make it a beneficiary of Indias ongoing economic growth.
Sector bellwether; BUY

Beneficiary of corporate capex and retail boom: BUY We expect an aggregate capital expenditure outlay of USD750b in infrastructure and allied sectors over the next four years. We believe ICICI Bank will translate this corporate capex push into an overall loan growth of 20% over the same period. We anticipate EPS expansion of 22% by FY10 from this expansion in the loan book. While we anticipate a more muted retail loan-book growth in the short-term, as a result of the unfavorable interest-rate regime, we believe ICICI Bank, with a retail book of 60% and impressive management depth is best placed to win the retail and non-metro spending boom anticipated in India. Net interest margin expansion of 40bp in next two years ICICI Bank has increased its low-cost deposit base over FY03-07 by approximately 61%. We expect the low-cost deposit proportion to expand by a further 27% over FY08-10. We anticipate a NIM expansion of 40bp by FY10. On the fee income front, we are modeling for a consolidated CAGR of 20% over FY08-10. We expect securities, asset management and private equity business to increase fee incomes at a CAGR of 3040% from FY08-10. We also anticipate significant value from its life insurance business over the next three to five years. Valuation we see significant upside Our 12-month price target for ICICI Bank is INR1,410. For the core bank, we use a three-stage Dividend Discount Model (DDM), to arrive at a price target of INR972. For ICICIs subsidiaries, we have used relative multiple valuation and we estimate the aggregate subsidiary contribution per share of ICICI Bank will be INR438. This doesnt include possible value unlocking from the listing of securities division over the next two quarters. Based on our target price for the core bank, it should trade at 16.7x our FY10 EPS estimate and 1.96x our FY10 BV estimate. Global credit problems cause investment mark-downs We expect more investment book-related write downs from the bank arising out of the deteriorating credit spread situation. While this is a near-term risk, we do not anticipate any significant credit quality concerns in the domestic book, especially on the corporate loan front.
Vijay Sarathi, CFA

BNP Paribas India Solutions Pvt Ltd (91 22) 6650 1677 vijay.sarathi@asia.bnpparibas.com
Abhishek Bhattacharya
BNP Paribas India Solutions Pvt Ltd (91 22) 6650 1678 abhishek.bhattacharya@asia.bnpparibas.com
Earnings Estimates And Valuation Ratios

YE Mar (INR m) Operating profit Reported net profit Recurring net profit Recurring EPS (INR) Rec EPS growth (%) Recurring P/E (x) Dividend yield (%) Price/book (x) Price/tangible book (x) ROA (%) ROE (%) 2007 36,480 31,102 31,102 34.64 7.7 25.8 1.1 3.3 3.3 1.04 13.4 2008E 54,102 43,826 43,826 39.15 13.0 22.8 1.7 2.1 2.1 1.16 12.2 2009E 69,738 54,481 54,481 48.67 24.3 18.4 1.6 2.0 2.0 1.19 11.1 2010E 86,231 65,069 65,069 58.13 19.4 15.4 1.9 1.8 1.8 1.18 12.3
Sources: ICICI Bank; BNP Paribas estimates
Share Price Daily vs MSCI
(INR) 1,500 1,300 1,100 900 700 Mar-07

Next results/event Market cap (USD m)
ICICI Bank Rel to MSCI India
(%) 5 0 (5) (10) (15)
(20) Jun-07 Sep-07 Dec-07 Mar-08

April 2008 23,553 123.5 100 Allamanda Investments (7%) 1,435.00/803.95 43.17 3.1 (3.4) (21.0)
12m avg daily turnover (USD m) Free float (%) Major shareholder 12m high/low (INR) ADR (USD) Avg daily turnover (USD m) Discount/premium (%) Disc/premium vs 52-wk avg (%)
Source: Datastream/Bloomberg
Please see the important notice on the inside back cover.
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VIJAY
SARATHI
ICICI
BANK
ICICIBC
IN
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2008
Contents
Recommended BUY with TP of INR1,410 ................................................................... 3
Core bank valuation Subsidiary valuation Peer valuation 4 5 5
India capital expenditure cycle going up........................................................................ 6

Capex a recipe for a 27% increase in loan book 6
Market leader in retail financial services...................................................................... 10

Modelling a 12% increase in the retail loan book 10
NIM will expand by 40bp by FY10 ............................................................................... 15

Softer rate regime should benefit a wholesale borrower like ICICI Bank 18
Improving asset quality over the years ........................................................................ 20

Exposure to the global sub-prime crisis 20
Appendices .................................................................................................................. 22
1. Devils advocate: Risks to our investment case 2. Key company information 22 23
Financial statements P&L, Balance sheet and cash flow ......................................... 24
Please see India Research Team list on page 26.

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VALUATION
Recommended BUY with TP of INR1,410

We believe ICICI Bank is among the best-placed Indian banks to benefit from the next few years expected economic expansion for the following reasons: 1. 2. The banks strong retail franchise and its deep relationships on the corporate loan front will ensure a robust loan book growth of 20% over the next three years. We project USD750b worth of corporate capital expenditure to happen in the next four years backed by spending in infrastructure and allied areas. We model a corporate loan book growth of 27% as an off-shoot of the capex, which translates into an EPS expansion of 22% by FY10. We expect muted growth of 12% in ICICI Banks retail book for FY09 as a result of relatively higher interest rates and steep asset valuations. However, with a strong retail franchise, a scalable technology and operational platform, and an impressive cross-sell network, we believe ICICI Bank is the best possible way to play the India consumer consumption story. The net interest margins for the bank should expand by 40bp by FY10 on the back of increases in low-cost deposit market shares and a more-benign interest rate regime. ICICI Banks growing proportion of fee incomes will contribute to the bank increasing revenue faster than its loan book. We anticipate an increase of 20% in its fee income over FY08-10. We expect the core bank to increase its ROE from the current 12.2% to 12.3% by FY10.
3.
4.
5.
We believe ICICI stock has over corrected in the recent market meltdown, and the market has not ascribed the full value implicit in the banks subsidiaries. Our target price implies an upside of 58% from the current market price. We have valued the core bank through a three-stage dividend discount model (DDM). We have used appropriate relative valuation multiples for all the subsidiaries. ICICI Bank has the following stakes in its subsidiary companies:
Exhibit 1: Stake In Subsidiaries Company ICICI Prudential Asset Management Co & Trust ICICI Lombard General Insurance Co ICICI Prudential Life Insurance Co ICICI Securities ICICI Venture ICICI Home Finance Ltd ICICI Bank UK Ltd ICICI Bank Canada Ltd ICICI Bank Eurasia Ltd
Sources: ICICI Bank; BNP Paribas
Stake (%) 51 74 74 100 100 100 100 100 100
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Core bank valuation

In our three-stage DDM evaluation of the core bank, some of our key assumptions included: 1. We modelled for income CAGR of 16.3% over FY09-13, followed by a compounded annual increase of 7.5% over FY14-20, and a terminal growth rate of 4%. Our income-development scenarios are based on our assumption of a 8% increase in real GDP until FY13, which we believe will be supported by a 16% increase in broad money supply (M3). We estimate the aggregate-loan growth will be in the range of 16%. We expect ICICI Banks core ROE to be 12.3% by FY10. We factored in a cost of equity of 13.55% for ICICI Bank, based on a risk-free rate of 7.5% and an equity risk premium of 5.5% Our dividend payout ratios range from 31% in the first stage to 50-60% in the intermediate phase, with a terminal payout ratio of 67%.
2.
3. 4. 5.
Exhibit 2: Dividend Discount Model

Year-end 31 Mar EPS (INR) DPS (INR) PV DPS (INR) 2007 2008E 2009E 2010E 2011E 2012E 2013E 2014E 2015E 2016E 2017E 2018E 2019E 2020E Terminal 34.6 10.1 39.2 15.6 15.6 48.7 14.2 12.5 58.1 17.0 13.2 63.8 22.3 15.2 68.6 27.4 16.5 73.2 32.9 17.5 77.7 38.9 18.1 82.4 41.2 16.9 87.2 48.0 17.4 91.8 50.5 16.1 96.0 52.8 14.8 100.4 60.2 14.9 104.9 63.0 13.7 109.1 73.1 769.4
Cost of equity (%) RFR (%) Beta Equity risk premium ERP (%) ROE (%) Terminal Payout (%) Sustainable growth (%)
13.6 7.5 1.1 5.5 12.3 67.0 4.0
PV of cash flows (INR) Terminal value (INR)
202.4 769.4
Equity value/share (INR)

Source: BNP Paribas estimates
972
Exhibit 3: Sensitivity Analysis Price to Book Value (FY10) Core (P/BV) WACC 14.25% 14.00% 13.75% 13.50% 13.25% 13.00% 12.75%
Terminal growth rate 3.50% 1.76 1.80 1.84 1.88 1.93 1.97 2.02 3.75% 1.80 1.84 1.88 1.92 1.96 2.01 2.06 4.00% 1.83 1.87 1.91 1.96 2.01 2.06 2.11 4.25% 1.87 1.91 1.95 2.00 2.05 2.10 2.16 4.50% 1.90 1.95 2.00 2.05 2.10 2.15 2.21
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Subsidiary valuation
Exhibit 4: Subsidiary Valuation Prudential Life Insurance APE FY10 (INR b) APE growth expected (%) Relative Mcap/NPE multiple ICICI stake (%) Contribution per ICICI Bank share (INR) Lombard General Insurance Expected FY10 Earnings (INR m) Relative P/E (x) ICICI stake (%) Contribution per ICICI Bank share (INR) ICICI Prudential Asset Management Expected FY10 AUM (INR b) Relative Mcap/AUM (%) ICICI stake (%) Contribution per ICICI Bank share (INR) Total subsidiary value (INR)
ICICI Venture 136.20 20.00 2.00 74.00 179 Current AUM (INR b) Target FY10 AUM (INR b) Relative Mcap/AUM multiple (%) ICICI stake (%) Contribution per ICICI Bank share(INR) ICICI Securities 2.13 15 74 21 Expected FY10 Earnings (INR b) Relative P/E(x) ICICI stake (%) Contribution per ICICI Bank share (INR) ICICI Bank UK 1,253 7.0 51 40 Other subsidiaries (INR) 438 12 Expected FY10 Earnings (INR b) Relative P/E (x) Contribution per ICICI Bank share (INR) 4.80 14 60 4.80 16 100 69 80 260 25 100 57
Peer valuation
Exhibit 5: Comparison Of Peer Valuation Company BBG code P/BV FY09E (x) ICICI Bank Regional peers ICBC China Minsheng A China Merchant Bank H China Construction Bank H Malayan Banking Kookmin Bank Korea Exchange Bank China CITIC Bank BoC HK Holdings Indian banks H D F C Bank Ltd Axis Bank Ltd Kotak Mahindra Bank Ltd State Bank of India Punjab National Bank Bank of India Bank of Baroda Canara Bank
Sources: Bloomberg; BNP Paribas estimates
P/E FY09E (x) 19.97 FY10E (x) 16.72
FY10E (x) 1.96
ICICIBC IN
2.13
1398 HK 600016 CH 3968 HK 939 HK MAY MK 060000 KS 004940 KS 998 HK 2388 HK
2.62 3.26 3.80 2.47 1.92 1.02 1.17 1.50 2.00
2.34 2.76 3.12 2.17 1.80 0.92 1.09 1.35 1.87
14.06 20.35 16.00 12.10 10.60 6.60 8.54 12.02 12.14
11.73 16.82 12.83 10.00 10.17 6.30 8.09 9.85 11.15
HDFCB IN AXSB IN KMB IN SBIN IN PNB IN BOI IN BOB IN CBK IN
3.30 2.91 2.97 1.79 1.22 1.43 0.96 0.78
2.83 2.35 2.43 1.44 1.06 1.18 0.83 0.66
21.26 20.50 17.36 11.90 7.28 6.74 6.15 5.32
16.28 14.90 12.76 10.25 6.07 5.55 5.21 4.44
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INVESTMENT
THESIS:
CORPORATE
SCENARIO
India capital expenditure cycle going up

We expect Indian companies to push an aggregate capital expenditure of USD750b over the next four years, primarily across infrastructure and allied sectors. This represents a CAGR of 25% over the period FY08-11. This is based on our analysis of the top-down and bottom-up trends in corporate capital expenditure cycles over this period.
Exhibit 6: Capex Trend
(INR b) 9,000 8,000 7,000 6,000 5,000 4,000 3,000 2,000 1,000 0
Utilities
Construction & housing
Telecom
Metal & mining
Oil & gas
Others
Infrastructure sectorutilities, construction and telecom to account for around 60% of USD750b capex over the next four years
FY08E
FY09E
FY10E
FY11E
We expect this USD750b capex to translate into USD550b of credit demand, which translates into a 25% CAGR for the corporate loan book of all scheduled commercial banks.
Capex a recipe for a 27% increase in loan book

ICICI Bank has deep corporate relationships in this space. Between 2004 and 2007, ICICI Banks loans outstanding to core infrastructure and services sectors, such as oil and gas, power, transportation, construction, mining and allied sectors, grew at a CAGR of 27.5%. With a rich history in project financing and deep corporate relationships, we expect ICICI Bank to be able to increase its corporate loan book at a CAGR of 27% over the next few years. As a result, we anticipate an EPS expansion of 22% by FY10 from this loan book growth.
Exhibit 7: EPS Sensitivity To Corporate Loan Growth Corporate loan growth (%) 23 25 27 29 31
FY10E EPS (INR) 56.34 57.23 58.13 59.04 59.95
EPS expansion (%) 20.0 20.9 21.9 22.8 23.7
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In addition to this growth in interest income from corporates, ICICI Bank generates fee income through a number of product lines:
Exhibit 8: Fee Based Products Retail Bank assurance Mutual fund distribution Foreign exchange transactions and remittances Letters of Credit for SMEs Securities brokerage Share depositary accounts Corporate Syndication Securitization Project finance structuring M&A Letters of credit Cash management and custodial services
Source: ICICI Bank
ICICI Bank is a the preferred partner for a large number of Indian companies that need to raise debt from foreign credit markets in the form of external commercial borrowing (ECB). The aggregate external commercial borrowing by Indian companies increased by a CAGR of 59.1% between 2004-07. We believe ICICI Bank is the preferred lead arranger for a large number of these transactions and that this revenue stream should continue to boost ICICIs fee income.
Exhibit 9: Aggregate Foreign Commercial Borrowing
(USD b) 18 16 14 12 10 8 6 4 2 0 Mar-04
External debt (LHS)
Growth (RHS)
(%) 90 80 70 60 50 40 30 20 10 0
Mar-05
Mar-06
Mar-07
Sources: CMIE; RBI; BNP Paribas estimates
Exhibit 10: Indian Investment Abroad
(USD b) 30 25 20 15 10 5 0 Mar-04
Direct investment abroad (LHS)
Growth (RHS)
(%) 90 80 70 60 50 40 30 20 10 0
Mar-05
Mar-06
Mar-07
Sources: CMIE; RBI; BNP Paribas estimates
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Growth in international banking a key lever

ICICI Bank operates subsidiaries in the UK, Canada and Russia and has branch presence or representative offices in several other regions including the US, China, the Middle East, South Africa, Continental Europe and Southeast Asia. We believe ICICI Bank is currently the best-placed Indian bank to cater to Indian companies increasing appetite for international mergers and acquisitions. ICICI Banks three foreign banking subsidiaries in the UK, Canada and Eurasia grew at a phenomenal pace between 2004 and 2007. These subsidiaries combined revenue increased at a CAGR of 490% over this period, while the asset base grew at a CAGR of 299%. Currently the UK subsidiary has started retail direct banking business and a majority of the funds are parked in investments, due to regulatory requirements around deposit stabilization. We believe ICICIs international banking operations will continue to drive growth and we have modeled for revenue CAGR of 53% FY07-09 and an asset CAGR of 51% over the same period.
Exhibit 11: Assets Growth Of International Banking Subsidiaries
(INR b) 800 700 600 500 400 300 200 100 0 FY04 FY05 FY06 FY07 FY08 FY09E
Exhibit 12: Revenue Growth Of International Banking Subsidiaries
(INR b) 35 30 25 20 15 10 5 0 FY04 FY05 FY06 FY07 FY08 FY09E
ICICI Bank has reined in its cost structure over the last few years as is evident the banks gradually improving return on assets. We expect operational costs to increase by 25% over the next two years, on account of the expansion in the number of branches and ATMs.
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Exhibit 13: ROA vs Cost To Income Ratio
(%) 58 56 54 52 50 48 46 FY06
Cost/income (LHS)
ROA (RHS)
(%) 1.25 1.20 1.15 1.10 1.05 1.00 0.95
ROA is expected to rise with lowering of cost-toincome ratio by FY10
FY07
FY08E
FY09E
FY10E
Exhibit 14: Operating Efficiency
(%) 60 50 40 30 20 10 0 FY03 FY04
Cost/assets (RHS)
Cost/income (LHS)
(%) 3.0 2.5 2.0 1.5 1.0 0.5 0.0
FY05
FY06
FY07
FY08E
FY09E
FY10E
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INVESTMENT
THESIS:
RETAIL
SCENARIO
Market leader in retail financial services

ICICI Bank is the pioneer of the retail financial services growth in India, expanding its retail loan book by 61% in the past four years. While we see a muted growth in retail financial services in the short term, as a result of prevailing high interest rates, we believe ICICI is among the best-placed banks in India to expand its scale in this segment in the long term. The current retail exposure for ICICIBC is approximately 62% of its total loan book.
Exhibit 15: Retail Book Composition
(INR b)
1,000 900 800 700 600 500 400 300 200 100 0
Two wheeler loans (LHS) Auto loans (LHS) Home loan (LHS) Two wheeler market share (RHS) Personal loans market share (RHS) Home loans market share (RHS)
Credit cards (LHS) Other personal loans (LHS) Corporate loans (LHS) Credit cards market share (RHS) Auto loans market share (RHS)
(%)
100 80 60 40 20 0
Composition of retail book: Home loans: 50%; Personal loans: 28%; Auto loans: 13%; Credit cards: 6%
FY05
Sources ICICI Bank; BNP Paribas estimates
FY06
FY07
FY08
Modelling a 12% increase in the retail loan book

Relatively higher interest rates and steep valuations in the property market have caused the mortgage business of ICICI (comprising 31% of the total loan book) to slow down over the last 15-18 months. We do not anticipate a meaningful turnaround in this situation until FY10. We expect ICICI to grow its retail book by focusing on growth in unsecured personal loans and credit card issuances. An emphasis on unsecured loans could lead to an increase in the NPA levels in the future.
Exhibit 16: Housing Affordability
(INR m) 9 8 7 6 5 4 3 2 1 0 Jan-03 Jul-03 Jan-04
Affordability
Mean home price
Mean home prices are moving beyond common affordability
Jul-04
Jan-05
Jul-05
Jan-06
Jul-06
Jan-07
As the above chart illustrates, since about January 2006, property prices have surpassed the affordability quotient for a majority of home buyers in India. In our analysis, we have defined the affordability quotient as the net disposable income, capitalized by the prime-lending rate applicable at that point in time.
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EPS sensitivity to retail-loan increases

Exhibit 14 illustrates the EPS sensitivity to our assumptions about the growth in the banks retail loan book.
Exhibit 17: EPS Sensitivity To Growth In Retail Loans Retail loan growth (%) 8 10 12 14 16
FY10E EPS (INR) 54.85 56.48 58.13 59.8 61.5
EPS expansion (%) 18.4 20.1 21.9 23.6 25.3
A big player in NRI remittances to India ICICI Bank is a key player in Indias inward foreign currency-remittance business through its internet-based wire transfer remittance facility Money2India. With approximately 100m non-resident Indians living abroad, the total remittances into India increased 16.5% over the last year, and approximately 9.5% over the last two years. ICICI management estimates it has a 25% market share in this business. We believe ICICI Bank earns a transaction fee worth approximately 15bp in this business. We believe the currency remittance business will be a key contributor to the fee income of ICICI Bank in the coming years.
Exhibit 18: Private Remittances To India
(USD b) 12 10 8 6 4 2 0 Mar-05 Jun-05 Sep-05 Dec-05 Mar-06 Jun-06 Sep-06 Dec-06 Mar-07 Jun-07 Sep-07
Sources: RBI; CMIE; BNP Paribas
Sufficient management depth to sustain growth in this market

Though the retail loan increases are likely to be muted in the near term, we do not see any grave threat to the robust long-term development expected in retail financial services. The low levels of personal debt and deep demand-supply mismatch in sectors like housing will ensure that the development story remains in place. We expect ICICI Bank, with its strong retail franchise and management depth to benefit from these long term growth drivers. Securitization ICICI Bank securitizes about 10% of its loan book to maintain its disbursal growth rate. The asset pool securitized typically consists of consumer loans.
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Exhibit 19: Loan Securitization
(INR b) 30 25 20 15 10 5 0 FY05
Book value securitized (LHS) Proportion of applicable loan book (RHS)
(%) 30 25 20 15 10 5 0
FY06
FY07
Growth in fee income from banking, asset management & brokerage businesses For the consolidated ICICI Bank, fee income was approximately 38% of total income at the close of FY07. Between 2004 and 2007 fee income recorded a stupendous growth of 73% CAGR. We expect it to grow at 20% CAGR till FY10.
Exhibit 20: Fee Income
(INR b) 140 120 100 80 60 40 20 0 FY02 FY03 FY04 FY05 FY06 FY07 FY08E FY09E FY10E
ICICIs two asset management subsidiaries ICICI Ventures (primarily venture capital investments) and ICICI Prudential AMC (which manages a number of mutual funds) have shown impressive growth in their Assets under Management (AUM) in recent times. We expect the venture fund and mutual fund AMC to grow their AUMs by 80% and 41% respectively over FY08-FY10.
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Exhibit 21: AUM Growth For ICICI Prudential Asset Management
(INR b) 1,400 1,200 1,000 800 600 400 200 0 FY05
ICICI AUM (LHS)
Market share (RHS)
(%) 14 12 10 8 6 4 2 0
FY06
FY07
FY08E
FY09E
FY10E
Exhibit 22: AUM Growth For ICICI Venture Fund
(INR b) 300 250 200 150 100 50 0 FY06 FY07 FY08E FY09E FY10E
We also expect ICICI Securities (the brokerage and investment banking subsidiary) to grow its PAT by 44% from FY08 to FY10 backed by 22% growth in its fee income from investment banking operations and 37% growth in its brokerage income from FY08 to FY10. Market leadership position among the private sector players in insurance space: We expect ICICIs Insurance arms Prudential Life Insurance and Lombard General Insurance to benefit from their market leader stature amongst the fast growing private sector pie. We expect Prudential Life to grow its annualized premium equivalent (APE) income at 39% from FY08 to FY10 with a new business adjusted profit (NBAP) margin of 20%. We expect Lombard to show a premium growth of 20% from FY08 to FY10.
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Exhibit 23: Market Share Hierarchy In Life Insurance

LIC ICICI Prudential Life Bajaj Allianz SBI Life HDFC Stndard Reliance Life Birla Sunlife Max New York Aviva Tata AIG Kotak Mahindra
0
Sources: IRDA; BNP Paribas
10
20
30
40
50
60
70 (%)
Exhibit 24: Market Share Hierarchy In General Insurance

New India National Insurance Oriental Ins United Ins ICICI-lombard Bajaj Allianz Reliance General IFFCO-Tokio Tata-AIG Royal sundaram Cholamandalam
0
Sources: IRDA; BNP Paribas
10
12
14
16
18
20 (%)
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INVESTMENT
THESIS:
MARGINS
NIM will expand by 40bp by FY10

The Reserve Bank of India (RBI) has approved 450 new deposit-taking branches for ICICI Bank. We expect the bank to have these new branches operational by 3Q09, and we anticipate ICICI will maintain its current deposit efficiency. We expect ICICI to lower its cost of funding as its low-cost deposit base expands. Bank branch expansion in India is regulated by RBI (the central bank) and banks cannot expand their branch network without RBIs approval. As low-cost deposits are directly tied to the size of the branch network, the number of branches a bank has, is a key success factor for any bank in India. While public sector banks (state owned banks) enjoy a pre-eminent position in terms of low-cost deposit base (also called CASA deposits in India stands for Current Accounts and Savings Accounts), private-sector banks have been increasing their CASA base steadily over the years.
Exhibit 25: CASA Market Share
ICICI Bank FY07 FY06 FY05 FY04 FY03 0 2 4 6 8 10
Private banks sector
12
14
16
18
20
22
24
26 (%)
Sources: CMIE; BNP Paribas
ICICI Bank has expanded its CASA market share by 218% over the period of 20032007. The banks CASA deposits have grown at a CAGR of 61% over the same period, compared with a growth of 17.1% for public-sector banks, 32.5% for privatesector banks and 29% for foreign banks in India. ICICI Bank depends on domestic borrowings, overseas borrowings (commercial and multilateral), retail and corporate deposits. On the deposit front, the bank increased its deposit base by a CAGR of 56.8% over FY05-07, backed by a growth of 56% in lowcost CASA deposits and an equally strong growth of 57.1% in time deposits. Within CASA, savings accounts increased faster than current accounts.
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Exhibit 26: Deposit Break-Up by Type
(INR b) 2,000 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0 FY03
Current
Savings
Term
FY04
FY05
FY06
FY07
Exhibit 27: Deposit Efficiency Of Branches
(No.) 1,000 900 800 700 600 500 400 300 200 100 0 FY04
No. of branches (LHS)
Deposit per branch (RHS)
(INR m) 3,500 3,000 2,500 2,000 1,500 1,000 500 0
FY05
FY06
FY07
FY08E
The average cost of deposits for the bank is vulnerable to the interest rate paid on time deposits. Over the period FY05-07 the average cost of deposits for ICICI Bank increased by approximately 2%, primarily driven by a 2.4% increase in the cost of time deposits. We believe this vulnerability will be reduced, as ICICI continues to expand its branch network and increase the CASA portion of its deposits.
Exhibit 28: Cost Of Deposits
(%) 8 7 6 5 4 3 2 1 0
Savings accounts
Time deposits
Average
FY05
FY06
FY07
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When we analyze the maturity profile of the deposit base as of March 2007, approximately 81% of the relatively expensive interest-bearing deposits have a maturity of less than one year. This bodes well for the bank, as we expect interest rates to ease through FY09.
Exhibit 29: Maturity Profile Of Interest Bearing Deposits
(INR b) 1,800 1,600 1,400 1,200 1,000 800 600 400 200 0
Savings accounts
Time deposits
< 1 year
1-3 years Deposit maturity
> 3 years
Given its operating history as a project finance institution not allowed to take public deposits, ICICI Bank has relied on wholesale borrowing in the last few years to fund its loan growth.
Exhibit 30: Domestic Market Borrowing
(INR b) 350 345 340 335 330 325 320 315 310 305 FY05
Market borrowing (LHS)
Average cost (RHS)
(%) 9.5 9.4 9.3 9.2 9.1 9.0
FY06
FY07
As the interest-rate regime tightened between 2005 and 2007, ICICI Bank cut back on its domestic market borrowing (primarily bond placements, institutional borrowing, corporate deposits, certificates of deposits and inter-bank borrowings), which increased at a marginal CAGR of 3.65% over 2005 to 2007. 95% of the bulk deposits of INR10m or more, representing approximately 57% of the total deposit base as of March 2007, had a maturity of one year or less. We believe the bank will enjoy improved net interest margins as these bulk deposits mature and are refinanced in a relatively lower interest-rate environment.
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Exhibit 31: Maturity Profile Of Term Deposits
(INR b) 600 500 400 300 200 100 0 < 3 months 3-6 months 6-12 months Term maturity > 12 months
To take advantage of the interest-rate advantage offered by foreign credit markets over the same period, ICICI Bank increased its foreign-market borrowing by about 72%. A large part of this increase was from foreign commercial borrowing, which increased at a CAGR of 88% over 2005-2007. As a proportion of total average liabilities, commercial foreign-currency borrowing increased from 5.62% to 9.12% during FY05-07. We believe the banks blended funding strategy, previously biased towards market borrowing and bulk deposits, allowed ICICI to be nimble and take advantage of the relative interest cost differential. We believe the expected relaxation of interest rates in India (and globally) will continue to benefit the interest margins of ICICI Bank.
Softer rate regime should benefit a wholesale borrower like ICICI Bank
Taking advantage of the easy liquidity conditions in the international markets, ICICI Bank dramatically increased its ECB borrowing between FY04 and FY07. While this strategy has served it well in the past, the recent turmoil in the international credit markets have caused its borrowing costs (over LIBOR) to widen. We believe the relative cost advantage for ICICI (foreign borrowing compared with domestic borrowing) to have remained in place, within the scope offered by RBIs ECB restrictions.
Exhibit 32: Borrowing Mix For ICICI Bank
(INR b) RBI/ interbank borrowings (LHS) Domestic borrowings from Govt and institutions (LHS) Domestic debt instruments (LHS) Overseas borrowing (LHS) Overseas borrowing/ total debt ratio (RHS) Cost of borrowing (RHS) Domestic debt/total debt ratio (RHS) (%)
450 400 350 300 250 200 150 100 50 0 FY02
100 80 60 40 20 0
FY03
FY04
FY05
FY06
FY07
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Softening interest rate regime likely to be a further fillip

RBI has tightened domestic liquidity conditions over the last 15-18 months through cash reserve ratio increases, repo rate hikes and other mechanisms. Interest rates in India have increased significantly over this period as illustrated here. We expect interest rates in Indian to ease over the next few quarters and this should further boost the banks net interest margins.
Exhibit 33: Interest Rate Movements
(%) 40 35 30 25 20 15 10 5 0 Mar-02
WPI growth (LHS) Bank credit growth (LHS) Cash reserve ratio (RHS)
M3 growth (LHS) Repo rate (RHS) Fed fund rate (RHS)
(%) 9 8 7 6 5 4 3 2 1
A bout of monetary tightening in recent times through repo-rate and CRR hikes have moderated money supply and credit growth from the 30% levels to the early 20% levels
Jan-03
Nov-03
Sep-04
Jul-05
May-06
Mar-07
0 Jan-08
Sources: CMIE; RBI; BNP Paribas
Overall, we have modeled for a net NIM expansion of 40bp from these factors and an expansion in EPS of 22% by FY10.
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INVESTMENT
THESIS:
ASSET
QUALITY
Improving asset quality over the years

Exhibit 34: Asset Quality
(INR b) 3,500 3,000 2,500 2,000 1,500 1,000 500 0 FY03 FY04 FY05
Total loan assets (LHS) Gross NPA/assets (RHS)
(%) 10 9 8 7 6 5 4 3 2 1 0
FY06
FY07
FY08E
FY09E
FY10E
ICICI Bank has steadily improved the quality of its loan book over the past few years, maintaining a phenomenal 34% CAGR. We believe the bank will maintain a healthy asset book over the next two years, with a gross NPA ratio in the 2.7% range.
Exhibit 35: Provision For Bad & Doubtful Debt
(INR b) 25 20 15 10 5 0 (5) FY03 FY04
Provisions for bad & doubtful assets (LHS) Provisions/total loan assets (RHS)
(%) 2.5 2.0 1.5 1.0 0.5 0.0 (0.5)
FY05
FY06
FY07
FY08E
FY09E
FY10E
Exposure to the global sub-prime crisis

ICICI Banks primary exposure to the ever deteriorating global credit crisis is through its fixed income investment and credit derivatives book. On the credit derivatives front, the exposure is largely through collateralized debt obligations (CDO) and credit linked notes, where the underlying credit is Indian/Asian corporates. The fixed income portfolio at the international subsidiaries in the UK and Canada is resulting from all the direct banking deposits currently being routed into investments. According to the prevailing regulation in these countries, ICICIs banking subsidiaries can start credit operations after a sufficient stabilization is achieved on the deposit side. We have summarized the relevant exposure below as per the latest available information.
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Exhibit 36: Exposure To Subprime Entity Parent Bank International Subsidiaries International Subsidiaries
Type of exposure CDO, CLN CDO, CLN Fixed Income
Principal amount (USD m) 1,600 600 3,700
FY08 exp MTM loss (USD m) 125 35 108
The MTM (marked-to-market) losses are primarily on account of the widening credit spreads and as per the available information there are no concerns around the underlying credit. With respect to the underlying credit, 65% is blue chip Indian credit and we see negligible credit impact from them. We expect the global credit situation to remain volatile over the medium term and it is likely that there could be more MTM losses. However, a bulk of these instruments have residual maturity of three to four years and there could be MTM write back if the credit spread situation improves over a period of time. In terms of our estimates, we do not see a material impact to our FY08 estimates from these MTM losses. In terms of our investment value reserve provision assumptions, we are factoring in INR13b (USD325m) for FY09 and INR15.8b (USD395m) for FY10.
Exhibit 37: Provision For Diminution In Value Of Investments
(INR b) 18 16 14 12 10 8 6 4 2 0 (2) FY03 FY04
Provision for investments (LHS) Provision/investment assets (RHS)
(%) 1.4 1.2 1.0 0.8 0.6 0.4 0.2 0.0 (0.2)
FY05
FY06
FY07
FY08E
FY09E
FY10E
No material impact from agriculture loan waivers

In the recent budget on 29 February 2008, the finance minister announced a loan waiver package to the tune of INR600b. The package would apply to all the agriculture loans made till March 2007 and due as of December 2007. Of this total waiver package, we believe the loan exposure of SCBs to be INR120b and the rest being shared by cooperative banks and regional rural banks. ICICIs rural loan book was INR90b at the end of December 2007 and we estimate ICICIs potential share of this loan waiver package to be about INR5b. However, there are strong indications that the banks will be compensated by the government for these loan waivers. Overall, we do not see a material impact to our positive thesis on ICICI Bank.
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APPENDIX
Devils advocate: Risks to our investment case

We see the following risks to our investment thesis: 1. An inability to improve the funding mix in favour of low cost deposits could hamper the banks ability to improve its net interest margins in line with the competition. Historically ICICI Bank has been a wholesale-funded institution, which has worked to its advantage in the low-interest regime globally in the past few years. Prolonged dependence on wholesale deposits, however, will cause the net interest margins for the bank to be volatile and could result in some loss of market share, especially in the retail lending portfolio. In the short term, we believe a delay in softening of interest rates is a likely risk. We expect a policy level interest rate cut of 50bp from the Reserve Bank of India over the next few quarters. Though we believe there is a strong case for a softer interest-rate regime, the central bank could maintain the status quo on this front, weighed in by the un-factored inflation in a pre-election year. If interest rates do not soften for an extended period of time, ICICI Bank could face sluggish growth in its retail portfolio. Investment book related mark downs from the core bank and in the international banking subsidiaries is a clear near to medium term risk. While a spread related marked-to-market write down need not be an overriding concern, there is very little data available currently to assess the extent of credit related risk in the investment book. We expect more MTM mark downs in the future and any negative surprises with respect to credit related write downs will clearly lead to more negative market sentiment for the bank. Non-performing assets could increase as a proportion of the loan book as the bank focuses on increasing its non-collateralized lending book in the form of personal loans and credit cards and from the general aging of the current loan book. Continued volatility in the international credit markets where ICICI Bank is an active borrower could hamper the interest margins in the future. Over the past few months, risk spreads for the banks paper have widened significantly as illustrated in Exhibit 38.
2.
3.
4.
5.
Exhibit 1.1: CDS Spread
(Basis points) 350 300 250 200 150 100 50 0 Mar-08
May-08
Jul-08
Sep-08
Dec-08
Feb-09
Sources: RBI; NSE; BNP Paribas
Regulatory risk in the form of branch network expansion delays in India and abroad is another possible investment risk.
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APPENDIX
Key company information

Exhibit 2.1: Management Background K V Kamath, MD, CEO: CEO of ICICI since 1996. Past experience includes a stint with Asian Development Bank during 1988-1996. Chanda Kochhar, JMD and CFO: Has been with ICICI since 1984. Handles global treasury, principal investments & trading, risk management and legal functions. Exhibit 2.2: Shareholding Pattern As Of December 2007
ADR/GDR 30%
Mutual funds 6% Insurance companies 11%
Individuals 7% Corporates 5% FIIs 41%
Source: ICICI Bank
Sources: NSE; BNP Paribas
Exhibit 2.3: Company Structure As Of December 2007
Exhibit 2.4: Revenue Breakdown FY07
Core banking ICICI BANK
Asset management 3%
51%
Asset management Prudential Asset Management
Insurance premium 8% Net interest income 44%
100%
International banking ICICI Bank UK ICICI Bank Canada ICICI Bank Eurasia
74%
Insurance Prudential Life Insurance Lombard General Insurance
Securities 4% Banking treasury income 10% Banking fee income 31%
100%
Retail NBFC ICICI Home Finance
100%
Brokerage and I-banking ICICI Securities
100%
Private equity ICICI venture
Source: ICICI Bank
Exhibit 2.5: Company Background ICICI Bank has spearheaded the retail financial services revolution in India. ICICI Bank is India's second-largest bank with total assets of INR3,767b (USD96b) at 21 December 2007 and profit after tax of INR30.08b for the nine months ended 31 December 2007. ICICI Bank is second amongst all the companies listed on the Indian stock exchanges in terms of free float market capitalisation. The Bank has a network of about 955 branches and 3,687 ATMs in India and presence in 17 countries
Source: ICICI Bank
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FINANCIAL
STATEMENTS
ICICI Bank
Profit and Loss (INR m) Year Ending March
Interest income Interest expense Net interest income Net fees & commission Foreign exchange trading income Securities trading income Dividend income Other income Non interest income Total income Staff costs Other operating costs Operating costs Pre provision operating profit Provisions for bad and doubtful debts Other provisons Operating profit Recurring non operating income Associates Goodwill amortisation Non recurring items Profit before tax Tax Profit after tax Minority interests Preferred dividends Other items Reported net profit Non recurring items & goodwill (net) Recurring net profit Per share (INR) Recurring EPS * Reported EPS DPS Growth Net interest income (%) Non interest income (%) Pre provision operating profit (%) Operating profit (%) Reported net profit (%) Recurring EPS (%) Reported EPS (%) Income breakdown Net interest income (%) Net fees & commission (%) Foreign exchange trading income (%) Securities trading income (%) Dividend income (%) Other income (%) Operating performance Gross interest yield (%) Cost of funds (%) Net interest spread (%) Net interest margin (%) Cost/income (%) Cost/assets (%) Effective tax rate (%) Dividend payout on recurring profit (%) ROE (%) ROE - COE (%) ROA (%) RORWA (%) * Pre exceptional, pre-goodwill and fully diluted
2006A
143,061 (95,974) 47,087 30,019 3,671 3,387 4,731 41,809 88,896 (10,823) (39,189) (50,012) 38,884 (7,947) 29 30,966 30,966 (5,565) 25,401 25,401 25,401 32.15 32.49 9.71 65.9 22.4 31.5 22.5 26.7 17.7 17.9 53.0 33.8 4.1 3.8 5.3 7.85 5.70 2.15 2.58 56.3 2.39 18.0 30.2 14.6 (1.2) 1.21 1.48
2007A
229,943 (163,585) 66,358 43,309 7,254 4,485 4,244 59,292 125,650 (16,167) (50,738) (66,906) 58,744 (21,593) (671) 36,480 36,480 (5,378) 31,102 31,102 31,102 34.64 34.84 10.09 40.9 41.8 51.1 17.8 22.4 7.7 7.2 52.8 34.5 5.8 3.6 3.4 8.95 6.74 2.21 2.58 53.2 2.24 14.7 29.1 13.4 (2.5) 1.04 1.25
2008E
311,673 (238,144) 73,529 63,807 8,599 2,591 15,140 90,136 163,665 (22,314) (60,375) (82,689) 80,976 (19,205) (7,668) 54,102 54,102 (10,276) 43,826 43,826 43,826 39.15 39.39 15.58 10.8 52.0 37.8 48.3 40.9 13.0 13.1 44.9 39.0 5.3 1.6 9.3 9.56 7.58 1.98 2.26 50.5 2.18 19.0 39.8 12.2 (3.6) 1.16 1.37
2009E
383,202 (281,281) 101,922 74,655 9,756 3,322 19,214 106,947 208,868 (27,935) (77,916) (105,851) 103,017 (20,173) (13,106) 69,738 69,738 (15,257) 54,481 54,481 54,481 48.67 48.97 14.20 38.6 18.7 27.2 28.9 24.3 24.3 24.3 48.8 35.7 4.7 1.6 9.2 9.69 7.26 2.43 2.58 50.7 2.31 21.9 29.2 11.1 (4.8) 1.19 1.40
2010E
458,469 (332,309) 126,160 84,744 11,071 4,504 23,845 124,164 250,324 (33,007) (91,754) (124,762) 125,563 (23,550) (15,782) 86,231 86,231 (21,161) 65,069 65,069 65,069 58.13 58.49 16.96 23.8 16.1 21.9 23.6 19.4 19.4 19.4 50.4 33.9 4.4 1.8 9.5 9.70 7.05 2.65 2.67 49.8 2.27 24.5 29.2 12.3 (3.6) 1.18 1.39
Net interest income CAGR of 31% from FY08 to FY10
15% growth in fee income for core bank. 20% CAGR in fee income from FY08 to FY10 for consolidated bank
EPS expansion of 22% from FY08 to FY10
Net interest margin expansion of 40bp
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Balance Sheet (INR m) Year Ending March

Gross customer loans Total provisions Interest in suspense Net customer loans Bank loans Government securities Trading securities Investment securities Cash & equivalents Other interest earning assets Tangible fixed assets Associates Goodwill Other intangible assets Other assets Total assets Customer deposits Bank deposits Other interest bearing liabilities Non interest bearing liabilities Hybrid capital Total liabilities Share capital Reserves Total equity Minority interests Total liabilities & equity Supplementary items Risk weighted assets (RWA) Average interest earning assets Average interest bearing liabilities Tier 1 capital Total capital Gross non performing loans (NPL) Per share (INR) Book value per share Tangible book value per share Growth Gross customer loans (%) Average interest earning assets (%) Total assets (%) Risk weighted assets (%) Customer deposits (%) Leverage & capital measures Customer loans/deposits (%) Equity/assets (%) Tangible equity/assets (%) RWA/assets (%) Tier 1 CAR (%) Total CAR (%) Asset quality Change in NPL (%) NPL/gross loans (%) Total provisions/gross loans (%) Total provisions/NPL (%)
2006A
2007A
2008E
2009E
2010E
18% CAGR in net loans for core bank and 20% CAGR for consolidated bank
1,483,857 2,007,156 2,328,698 2,761,472 3,235,804 (22,226) (48,500) (64,424) (76,801) (88,779) 1,461,631 1,958,656 2,264,274 2,684,671 3,147,025 510,745 673,682 874,786 1,093,483 1,312,179 204,729 238,896 306,520 367,824 441,389 170,402 371,213 422,786 546,869 684,411 39,807 39,234 48,188 52,588 56,508 126,575 164,899 214,369 278,680 348,350 2,513,890 3,446,581 4,130,923 5,024,114 5,989,862 1,650,832 2,305,102 2,650,867 3,313,584 385,219 512,560 816,260 966,260 252,279 382,286 187,740 231,902 2,288,330 3,199,948 3,654,867 4,511,746 12,398 12,493 14,620 14,620 213,162 234,139 461,436 497,748 225,560 246,633 476,056 512,368 2,513,890 3,446,581 4,130,923 5,024,114 3,976,301 1,166,260 291,565 5,434,126 14,620 541,116 555,736 5,989,862
22% growth in overall deposits backed by 27% growth in CASA deposits
2,085,940 2,899,930 3,511,285 4,270,497 5,091,383 1,823,226 2,569,778 3,259,033 3,955,772 4,726,446 1,684,842 2,426,856 3,142,395 3,873,486 4,711,202 191,820 215,030 429,018 455,327 487,963 278,430 338,960 625,487 687,700 767,867 22,226 48,500 64,424 76,801 88,779 284.08 284.08 57.6 44.8 49.9 54.5 65.4 88.5 9.0 9.0 83.0 9.2 13.3 (19.8) 1.5 1.5 100.0 272.32 272.32 35.3 40.9 37.1 39.0 39.6 85.0 7.2 7.2 84.1 7.4 11.7 118.2 2.4 2.4 100.0 424.75 424.75 16.0 26.8 19.9 21.1 15.0 85.4 11.5 11.5 85.0 12.2 17.8 32.8 2.8 2.8 100.0 457.39 457.39 18.6 21.4 21.6 21.6 25.0 81.0 10.2 10.2 85.0 10.7 16.1 19.2 2.8 2.8 100.0 496.37 496.37 17.2 19.5 19.2 19.2 20.0 79.1 9.3 9.3 85.0 9.6 15.1 15.6 2.7 2.7 100.0
Capital Adequacy ratio to remain well above the stipulated 12%
NPA-Loan ratio of 2.7% by FY10
Valuation
2006A
2007A
25.8 40.7 25.6 1.1 3.3 3.3 5.2
2008E
22.8 36.0 22.7 1.7 2.1 2.1 3.3
2009E
18.4 29.0 18.2 1.6 2.0 2.0 3.1
2010E
15.4 24.3 15.3 1.9 1.8 1.8 2.8
Recurring P/E (x) * 27.8 Recurring P/E @ target price (x) * 43.9 Reported P/E (x) 27.5 Dividend yield (%) 1.1 Price/book (x) 3.1 Price/tangible book (x) 3.1 Price/tangible book @ target price (x) 5.0 * Pre exceptional, pre-goodwill and fully diluted
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India Research Team

Praveen Chakravarty
Head of India Research BNP Paribas India Solutions Pvt Ltd (91 22) 6650 1696 praveen.chakravarty@asia.bnpparibas.com
Preeti Dubey, CFA

Metals & Mining BNP Paribas India Solutions Pvt Ltd (91 22) 6650 1671 preeti.dubey@asia.bnpparibas.com
Karan Gupta
Metals & Mining (Associate) BNP Paribas India Solutions Pvt Ltd (91 22) 6650 1662 karan.gupta@asia.bnpparibas.com
Vishal Sharma
Infrastructure - E&C BNP Paribas India Solutions Pvt Ltd (91 22) 6650 1672 vishal.sharma@asia.bnpparibas.com
Shashank Abhisheik
Infrastructure - E&C (Associate) BNP Paribas India Solutions Pvt Ltd (91 22) 6650 1673 shashank.abhisheik@asia.bnpparibas.com
Sandeep Mathew
Real Estate BNP Paribas India Solutions Pvt Ltd (91 22) 6650 1665 sandeep.mathew@asia.bnpparibas.com
Avneesh Sukhija
Real Estate (Associate) BNP Paribas India Solutions Pvt Ltd (91 22) 6650 1667 avneesh.sukhija@asia.bnpparibas.com
Lakshminarayana Ganti
Capital Goods/Cement BNP Paribas India Solutions Pvt Ltd (91 22) 6650 1676 lakshminarayana.ganti@asia.bnpparibas.com
Charanjit Singh
Capital Goods/Cement (Associate) BNP Paribas India Solutions Pvt Ltd (91 22) 6650 1686 charanjit.singh@asia.bnpparibas.com
Girish Nair
Utilities BNP Paribas India Solutions Pvt Ltd (91 22) 6650 1679 girish.nair@asia.bnpparibas.com
Sriram Somayajula
Utilities (Associate) BNP Paribas India Solutions Pvt Ltd (91 22) 6650 1670 sriram.somayajula@asia.bnpparibas.com
Amit Shah
Oil & Gas BNP Paribas India Solutions Pvt Ltd (91 22) 6650 1664 amit.shah@asia.bnpparibas.com
Alok Deshpande
Oil & Gas (Associate) BNP Paribas India Solutions Pvt Ltd (91 22) 6650 1663 alok.deshpande@asia.bnpparibas.com
Abhiram Eleswarapu
Tech - IT BNP Paribas India Solutions Pvt Ltd (91 22) 6650 1684 abhiram.eleswarapu@asia.bnpparibas.com
Avinash Singh
Tech - IT (Associate) BNP Paribas India Solutions Pvt Ltd (91 22) 6650 1685 avinash.singh@asia.bnpparibas.com
Sameer Naringrekar
Tech - Telecom BNP Paribas India Solutions Pvt Ltd (91 22) 6650 1674 sameer.naringrekar@asia.bnpparibas.com
Kunal Vora
Tech - Telecom (Associate) BNP Paribas India Solutions Pvt Ltd (91 22) 6650 1675 kunal.d.vora@asia.bnpparibas.com
Vijay Sarathi, CFA

Financial Services BNP Paribas India Solutions Pvt Ltd (91 22) 6650 1677 vijay.sarathi@asia.bnpparibas.com
Abhishek Bhattacharya
Financial Services (Associate) BNP Paribas India Solutions Pvt Ltd (91 22) 6650 1678 abhishek.bhattacharya@asia.bnpparibas.com
Joseph George
Consumer BNP Paribas India Solutions Pvt Ltd (91 22) 6650 1669 joseph.george@asia.bnpparibas.com
Manish Gupta
Consumer (Associate) BNP Paribas India Solutions Pvt Ltd (91 22) 6650 1668 manish.a.gupta@asia.bnpparibas.com
26
BNP
PARIBAS
38
VIJAY
SARATHI
ICICI
BANK
ICICIBC
IN
13
MARCH
2008
DISCLAIMERS
&
DISCLOSURES
This report was produced by a member company of the BNP Paribas Group (Group). This report is for the use of intended recipients only and may not be reproduced (in whole or in part) or delivered or transmitted to any other person without our prior written consent. By accepting this report, the recipient agrees to be bound by the terms and limitations set out herein. The information contained in this report has been obtained from public sources believed to be reliable and the opinions contained herein are expressions of belief based on such information. No representation or warranty, express or implied, is made that such information or opinions is accurate, complete or verified and it should not be relied upon as such. This report does not constitute a prospectus or other offering document or an offer or solicitation to buy or sell any securities or other investments. Information and opinions contained in this report are published for reference of the recipients and are not to be relied upon as authoritative or without the recipients own independent verification or taken in substitution for the exercise of judgement by the recipient. All opinions contained herein constitute the views of the analyst(s) named in this report, they are subject to change without notice and are not intended to provide the sole basis of any evaluation of the subject securities and companies mentioned in this report. Any reference to past performance should not be taken as an indication of future performance. No member company of the Group accepts any liability whatsoever for any direct or consequential loss arising from any use of the materials contained in this report. The analyst(s) named in this report certifies that (i) all views expressed in this report accurately reflect the personal views of the analyst(s) with regard to any and all of the subject securities and companies mentioned in this report and (ii) no part of the compensation of the analyst(s) was, is, or will be, directly or indirectly, related to the specific recommendation or views expressed herein. This report is prepared for professional investors and is being distributed in Hong Kong by BNP Paribas Securities (Asia) Limited to persons whose business involves the acquisition, disposal or holding of securities, whether as principal or agent. BNP Paribas Securities (Asia) Limited, a subsidiary of BNP Paribas, is regulated by the Securities and Futures Commission for the conduct of dealing in securities and advising on securities. This report is being distributed in the United Kingdom by BNP Paribas London Branch to persons who are not private customers as defined under U.K. securities regulations. BNP Paribas London Branch, a branch of BNP Paribas, is regulated by the Financial Services Authority for the conduct of its designated investment business in the U.K. This report is being distributed in the United States by BNP Paribas Securities Corporation to U.S. Persons as defined under U.S. securities regulations or by a member of the Group that is not registered as a U.S. broker-dealer to major U.S. institutional investors. BNP Paribas Securities Corporation, a subsidiary of BNP Paribas, is a broker-dealer registered with the Securities and Exchange Commission. BNP Paribas Securities Corporation accepts responsibility for the contents of this report only where the report has been distributed by it to U.S. recipients. Distribution or publication of this report in any other places to persons which are not permitted under the applicable laws or regulations of such places is strictly prohibited.
Recommendation structure
All share prices are as at market close on 7 March 2008 unless otherwise stated. Stock recommendations are based on absolute upside (downside), which we define as (target price* - current price) / current price. If the upside is 10% or more, the recommendation is BUY. If the downside is 10% or more, the recommendation is REDUCE. For stocks where the upside or downside is less than 10%, the recommendation is HOLD. In addition, we have key buy and key sell lists in each market, which are our most commercial and/or actionable BUY and REDUCE calls and are limited to at most five key buys and five key sells in each market at any point in time. Unless otherwise specified, these recommendations are set with a 12-month horizon. Thus, it is possible that future price volatility may cause a temporary mismatch between upside/downside for a stock based on market price and the formal recommendation. *In most cases, the target price will equal the analyst's assessment of the current fair value of the stock. However, if the analyst doesn't think the market will reassess the stock over the specified time horizon due to a lack of events or catalysts, then the target price may differ from fair value. In most cases, therefore, our recommendation is an assessment of the mismatch between current market price and our assessment of current fair value. Sector recommendations are based on: OVERWEIGHT Sector coverage universe fundamentals are improving. NEUTRAL Sector coverage universe fundamentals are steady, neither improving nor deteriorating. UNDERWEIGHT Sector coverage universe fundamentals are deteriorating. 2008 BNP Paribas Group
27
BNP
PARIBAS
39
HONG KONG
BNP Paribas Securities (Asia) Ltd 63/F, Two International Finance Centre 8 Finance Street, Central Hong Kong SAR China Tel (852) 2825 1888 Fax (852) 2845 9411
BEIJING
BNP Paribas Equities (Asia) Ltd Beijing Representative Office Unit 1618, South Tower Beijing Kerry Centre 1 Guang Hua Road, Chao Yang District Beijing 100020, China Tel (86 10) 6561 1118 Fax (86 10) 6561 2228
SHANGHAI
BNP Paribas Equities (Asia) Ltd Shanghai Representative Office Room 5606-08 Plaza 66 1266 Nanjing Xi Lu Shanghai 200040 China Tel (86 21) 6288 2822 Fax (86 21) 6288 2818
BANGKOK
(In cooperation with BNP Paribas) Thanachart Securities Public Co Ltd 28/F, Unit A1 Siam Tower Building 989 Rama 1 Road, Patumwan Bangkok 10330 Thailand Tel (66 2) 617 4900 Fax (66 2) 658 1470
JAKARTA
PT BNP Paribas Securities Indonesia Menara Batavia, 20/F JI. KH. Mas Mansyur Kav. 126 Jakarta 10220 Indonesia Tel (62 21) 5790 0500 Fax (62 21) 5790 0501
KUALA LUMPUR
BNP Paribas Capital (Malaysia) Sdn. Bhd. Suite 21.03 Level 21 Menara Dion 27 Jalan Sultan Ismail 50250 Kuala Lumpur Malaysia Tel (60 3) 2050 9928 Fax (60 3) 2070 0298
SEOUL
BNP Paribas Securities Korea Co Ltd 22/F, Taepyeongno Building 310 Taepyeongno 2-ga Jung-gu, Seoul 100-767 Korea Tel (82 2) 2125 0500 Fax (82 2) 2125 0593
SINGAPORE
BNP Paribas Securities (Singapore) Pte Ltd (Co. Reg. No. 199801966C) 20 Collyer Quay #08-01 Tung Centre Singapore 049319 Tel (65) 6210 1288 Fax (65) 6210 1980
TAIPEI
BNP Paribas Securities (Taiwan) Co Ltd Room 302, 3/F 52 Min Sheng East Road, Sec. 4 Taipei 105 Taiwan Tel (886 2) 2175 7000 Fax (886 2) 2719 8530
TOKYO
BNP Paribas Securities (Japan) Ltd 18/F, Tokyo Sankei Building 1-7-2, Otemachi, Chiyoda-Ku Tokyo 100-0004 Japan Tel (81 3) 5290 8400 Fax (81 3) 5290 1124
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BNP Paribas The Equitable Tower 787 Seventh Avenue New York NY 10019, USA Tel (1 212) 841 3800 Fax (1 212) 841 3810
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BNP Paribas Aeschengraben 26 CH 4002 Basel Switzerland Tel (41 61) 276 5555 Fax (41 61) 276 5514
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BNP Paribas 2 Place de Hollande 1211 Geneva 11 Switzerland Tel (41 22) 787 7377 Fax (41 22) 787 8020
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BNP Paribas 10 Harewood Avenue London NW1 6AA UK Tel (44 20) 7595 2000 Fax (44 20) 7595 2555
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BNP Paribas Equities France Socit de Bourse 3 rue de L Arbre Sec 69001 Lyon France Tel (33 4) 7210 4001 Fax (33 4) 7210 4029
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BNP Paribas SA, sucursal en Espana Hermanos Becquer 3 PO Box 50784 28006 Madrid Spain Tel (34 91) 745 9000 Fax (34 91) 745 8888
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BNP Paribas Equities Italia SIM SpA Piazza San Fedele, 2 20121 Milan Italy Tel (39 02) 72 47 1 Fax (39 02) 72 47 6562
PARIS
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ZURICH
BNP Paribas Talstrasse 41 8022 Zurich Switzerland Tel (41 1) 229 6891 Fax (41 1) 267 6813
MANAMA
BNP Paribas Bahrain PO Box 5253 Manama Bahrain Tel (973) 53 3978 Fax (973) 53 1237
www.equities.bnpparibas.com
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Table of Contents

Rpt. 13267742 19-Mar-2008

ICICI BANK JEFFERIES & COMPANY, INC. - CHATTERJEE, ANINDYA

Rpt. 13260434 17-Mar-2008

ICICI BANK EDELWEISS CAPITAL LIMITED - GOYAL, VISHAL, ET AL

Rpt. 13243991 13-Mar-2008

These reports were compiled using a product of Thomson Financial.

March 19, 2008 Financial Services Consumer Finance India

ICICI Bank (NYSE: IBN)

Rating Change Price Target Change Estimate Change

USD Rev. (MM) Prev. EV/Rev. EPS FY Mar Prev. FY FY P/E

Anindya Chatterjee (212) 284-3490, achatterjee@jefferies.com

Please see important disclosure information on pages 5 - 7 of this report.

Please see important disclosure information on pages 5 - 7 of this report.

Table 1: IBNs Investment Exposure in Overseas Markets (approximate figures)

ICICI Bank, Canada

Source: Company data; Jefferies Research

Table 2: IBN - Income Statement & Estimate Variance Analysis

Source: Company data; Jefferies Research

Table 3: IBN Capital raised in 2H2007

Please see important disclosure information on pages 5 - 7 of this report.

Table 4: IBN - Balance Sheet

Table 5: IBN - Quarterly and Annual Income Statement

Source: Company data; Jefferies Research

Please see important disclosure information on pages 5 - 7 of this report.

Meanings of Jefferies & Company, Inc, Ratings

Risk which may impede the achievement of our Price Target

BUY [BUY/ SB] HOLD [HOLD] SELL [SU/ UNPF]

60.21 37.46 2.33

11.82 7.79 15.00

Additional information for UK and Canadian investors

Please see important disclosure information on pages 5 - 7 of this report.

2008 Jefferies & Company, Inc,

Please see important disclosure information on pages 5 - 7 of this report.

India Equity ICICI Bank Research | Banking

: 932.3 / 20,810 : 3,331.2

Share Holding Pattern (%)

Promoters MFs, FIs & Banks FIIs Others

0.0 16.9 40.0 43.1

Excerpts from the FY07 results of Prudential Plc (schedule 5)

Extent of impact High Medium Low Low Low

15.8 12.8 5.0 8.5 9.3 12.0

Coverage group(s) of stocks by primary analyst(s): Banking and Financial Services:

Near term headwinds offset valuations comfort (SOBs)

Distribution of Ratings / Market Cap

* 14 stocks under review / 6rating withheld

Between 10bn and 50 bn

ICICIBC IN Initiation 13 March 2008

Net Profit 09....... INR54.5b

Diff from Consensus..(1.5%) Consensus (mean) ........INR55.3b Consensus (momentum) ..........

Sources: Thomson One Analytics; Bloomberg; BNP Paribas estimates

Sector bellwether; BUY

Vijay Sarathi, CFA

Earnings Estimates And Valuation Ratios

Sources: ICICI Bank; BNP Paribas estimates

Share Price Daily vs MSCI

(INR) 1,500 1,300 1,100 900 700 Mar-07

ICICI Bank Rel to MSCI India

(%) 5 0 (5) (10) (15)

(20) Jun-07 Sep-07 Dec-07 Mar-08

Please see the important notice on the inside back cover.

India capital expenditure cycle going up........................................................................ 6

Market leader in retail financial services...................................................................... 10