Rating Rationale
April 13, 2018 | Mumbai
ICICI Bank Limited
 Rating Reaffirmed
Rating Action
Upper Tier-II Bonds (Under Basel II) Aggregating Rs.8495 Crore CRISIL AAA/Stable (Reaffirmed)
Tier-I Perpetual Bonds (Under Basel II) Aggregating Rs.518 Crore  CRISIL AAA/Stable (Reaffirmed)
Bonds/Debentures Aggregating Rs.629 Crore* CRISIL AAA/Stable (Reaffirmed)
1 crore = 10 million
Refer to annexure for Details of Instruments & Bank Facilities
*Pertains to the erstwhile ICICI Ltd.'s debt instruments rated by CRISIL; these instruments were transferred to ICICI Bank following the merger of ICICI Ltd with ICICI Bank
Detailed Rationale

CRISIL has reaffirmed its rating on ICICI Bank Limited (ICICI Bank) debt instruments at 'CRISIL AAA/Stable'.
The ratings on ICICI Bank's debt instruments continue to reflect the bank's healthy capitalisation, strong market position and comfortable resource profile. These strengths are tempered somewhat by the pressure on the bank's asset quality from exposures to highly leveraged corporate groups. However, the bank's healthy capital position, coupled with its demonstrated ability to raise capital and steady pre-provisioning profits cushions the bank's credit risk profile against asset quality risks. Meanwhile, the asset quality performance of the bank's retail asset portfolio that constitutes almost half of the bank's advances mix as on December 31, 2017 is expected to remain stable over the medium term.
CRISIL has taken note of ICICI Bank Board's response to the recent allegations of potential conflict of interest pertaining to the bank's exposure to Videocon group. CRISIL believes that this exposure, which has already been classified as a non-performing asset (NPA) with sizeable provisioning by the bank, is in itself not material in the context of its outstanding loan book or capital. Any further provisioning or even write-offs pertaining to that exposure are not likely to impact the bank's credit risk profile. CRISIL anticipates continuation in ICICI Banks' strategy of building upon its strong market position in the Indian wholesale and retail lending markets, while maintaining its healthy capitalization levels and strong liability franchise, even as it strives to improve its asset quality. CRISIL will also monitor developments pertaining to the ongoing investigations on the bank's exposure to Videocon group to watch out for any potential materiality in outcomes on areas like management stability or fund raising ability and suitably factor them in its rating.

Analytical Approach

For arriving at its ratings, CRISIL has combined the business and financial risk profiles of ICICI Bank and its subsidiaries.

Key Rating Drivers & Detailed Description
* Healthy capitalisation: 
ICICI Bank had a sizeable networth of Rs 1,04,500 crore, and a strong Tier-I capital adequacy ratio (CAR) of 14.6% and overall CAR of  17.7% under Basel III as on December 31, 2017, making it amongst the well capitalised banks in India. The bank's networth coverage for net non-performing asset (NPA), while declined to 4.4 times as on December 31, 2017, remains higher than the industry average. ICICI Bank also has adequate flexibility to raise additional capital through the sale of stakes in subsidiaries (the bank has raised around Rs.14500 crore in the last couple of years). Given the bank's healthy cash accruals and demonstrated ability to raise capital, it is likely to maintain healthy capitalisation to support overall credit risk profile of the bank and also adequately cover for asset-side risks while pursuing credit growth over the medium term.
* Strong market position in the financial services sector
ICICI Bank is among the largest private-sector banks in India with an asset base of Rs 8.1 lakh crore as on December 31, 2017. It is also one of the three banks that has been classified as 'Domestic Systemically Important Banks (D-SIBs)' by the Reserve Bank of India highlighting its significance to the overall financial system. The bank's management team has been instrumental in establishing strong market position for the bank and its subsidiaries. Size, scale and positioning are key strengths for the ICICI group in its various business segments. As a leading full-service universal banking group with a pan-India footprint, the ICICI group has a strong presence in life and general insurance, asset management, private equity and retail broking. The bank's wide geographical spread is reflected in its network of 4860 branches as on December 31, 2017.
* Healthy resource profile
Resource profile remains healthy, supported by high proportion of low-cost current account and savings account (CASA) deposits. CASA deposits, as a proportion of total deposits, remain healthy and had expanded to 50.4% as on December 31, 2017 while average CASA ratio was 45.7% for the nine months ended December 31, 2017. Further, total retail deposits constituted a high 74% of total deposits as on same date. This provides stability to the bank's resource profile. CRISIL believes that ICICI Bank's wide branch network and strong focus on digital banking will help it maintain higher-than-industry-average CASA levels and the bank will be able to maintain competitive funding cost over the medium term.
* Asset quality performance remains sensitive to stress in the corporate sector
Asset quality of the bank is expected to remain under pressure in the near term. Gross NPAs have remained at elevated levels at 7.8% as on December 31, 2017 (7.9% in March 31 2017 and 5.2% as on March 31, 2016) which is higher than the average for private sector banks. The deterioration in asset quality has been primarily due to delinquencies in the bank's corporate loan book in the vulnerable sectors including infrastructure and iron & steel. With the revision in the RBI's framework for resolution of stressed assets in February 2018, the bank may witness further slippages from stressed accounts structured under various RBI schemes mainly from strategic debt restructuring (SDR) and Scheme for Sustainable Structuring of stressed Assets (S4A). However, with the expected resolution in fiscal 2019 of many large corporate NPAs referred under the Insolvency and Bankruptcy code (IBC) and estimated slowdown in the pace of fresh slippages to NPAs in the current fiscal, the pressure on the bank's asset quality is expected to reduce over the medium term.
Nevertheless, the bank has been increasing the proportion of retail assets, where asset quality performance has been and is expected to be stable over the medium term.  Moreover, the bank's steady pre-provision profits on the back of comfortable net interest margins and healthy fee based income continues to support its earnings profile despite increase in provisioning costs in fiscal 2018. Bank's provision coverage ratio has increased to 48.3% as on December 31, 2017 from ~40% as on March 31, 2017. While the increase in gross NPAs and the resultant increase in provisioning costs will impact the earnings profile of the bank in the near term, expected recoveries from stressed assets in the current fiscal coupled with improvement in credit offtake is expected to partly offset this impact. CRISIL expects the bank to take necessary measures to address the asset quality challenges and also, maintain its overall credit profile. The bank has demonstrated its resilience in the past while tiding over asset quality pressures faced in the aftermath of the global financial crisis by putting in place an institutionalized risk assessment framework involving enhanced control and monitoring mechanisms.
Outlook: Stable

CRISIL believes ICICI Bank will maintain its strong market position, healthy capitalisation, and comfortable resource profile. The bank will remain focused on growth in the secured asset classes over the medium term and will sustain its earnings levels above industry average. The outlook may be revised to 'Negative' if the bank witnesses higher-than-expected deterioration in its asset quality and earnings, or faces any other unexpected developments that may materially affect its ability to raise capital when required.

About the Bank

Promoted by the erstwhile ICICI Ltd, ICICI Bank was incorporated in 1994. In 2002, ICICI Ltd was merged with ICICI Bank. In August 2010, ICICI Bank acquired Bank of Rajasthan (BoR), enhancing its presence in northern and western India. ICICI Bank has a consolidated asset base of Rs 10.54 lakh crore as on December 31, 2017.
ICICI Bank reported a standalone profit after tax (PAT) of Rs 5757 crore for the nine months ended December 31, 2017, against PAT of Rs 7776 crore for the same period in fiscal 2017. At the consolidated level (with subsidiaries and other associate entities), ICICI Bank reported PAT of Rs 6570 crore in the nine months ended December 31, 2017 as against PAT of Rs 8106 crore for the corresponding period of the previous year.

Key Financial Indicators (Consolidated)
As On/For The Period Ended December 31, Unit 2017 2016
Total Assets Rs Cr. 10,53,677 9,62,897
Total income (net of interest expenses) Rs Cr. 59,777 58,088
Profit after tax Rs Cr. 6,570 8,106
Gross NPA* 7.82 7.20
Overall capital adequacy ratio* 17.65 15.98
Return on assets (annualised)* 0.97 1.40
* on a standalone basis for the bank

Any other information: Not applicable

Note on complexity levels of the rated instrument:
CRISIL complexity levels are assigned to various types of financial instruments. The CRISIL complexity levels are available on www.crisil.com/complexity-levels. Users are advised to refer to the CRISIL complexity levels for instruments that they consider for investment. Users may also call the Customer Service Helpdesk with queries on specific instruments.
Annexure - Details of Instrument(s)
ISIN Instrument Date of Issue Coupon Rate (%) Date of Maturity Issue Size Outstanding Rating with outlook
INE090A08PT6 Upper Tier II Bonds (Under Basel II) 29-Jan-10 8.81  29-Jan-25 1600 CRISIL AAA/Stable
INE090A08PQ2 Upper Tier II Bonds (Under Basel II) 12-Jan-10 8.9 12-Jan-25 150 CRISIL AAA/Stable
INE090A08PQ2 Upper Tier II Bonds (Under Basel II) 12-Jan-10 8.9 12-Jan-25 630 CRISIL AAA/Stable
INE090A08PH1 Upper Tier II Bonds (Under Basel II) 31-Aug-09 8.92 31-Aug-24 1000 CRISIL AAA/Stable
INE090A08PB4 Upper Tier II Bonds (Under Basel II) 26-Mar-09 9.95 26-Mar-24 1271 CRISIL AAA/Stable
INE090A08OV5 Upper Tier II Bonds (Under Basel II) 11-Nov-08 12 11-Nov-23 1100 CRISIL AAA/Stable
INE090A08OV5 Upper Tier II Bonds (Under Basel II) 11-Nov-08 12 11-Nov-23 400 CRISIL AAA/Stable
INE090A08OT9 Upper Tier II Bonds (Under Basel II) 22-Sep-08 11.25 22-Sep-23 1000 CRISIL AAA/Stable
INE090A08OH4 Upper Tier II Bonds (Under Basel II) 20-Jun-08 10 20-Jun-23 750 CRISIL AAA/Stable
INE090A08NH6 Upper Tier II Bonds (Under Basel II) 10-Jan-08 9.7 10-Jan-23 500 CRISIL AAA/Stable
INE090A08LJ6 Upper Tier II Bonds (Under Basel II) 15-Jan-07 9.4 15-Jan-22 94 CRISIL AAA/Stable
INE090A08LK4 Perpetual Tier 1 bonds(Under Basel II) 15-Jan-07 9.98 15-Jan-2106 18 CRISIL AAA/Stable
INE090A08NG8 Perpetual Tier 1 bonds(Under Basel II) 10-Jan-08 10.15 10-Jan-2107 199 CRISIL AAA/Stable
INE090A08NG8 Perpetual Tier 1 bonds(Under Basel II) 10-Jan-08 10.15 10-Jan-2107 301 CRISIL AAA/Stable
INE005A11473 Bonds* 3-Mar-99  Zero coupon 3-Mar-17 104.5 CRISIL AAA/Stable
INE005A11507 Bonds* 28-Apr-99 Zero coupon 28-Apr-17 108.3 CRISIL AAA/Stable
INE005A11523 Bonds* 16-Jun-99 Zero coupon 16-Nov-17 105.4 CRISIL AAA/Stable
INE090A08SQ6 Bonds 22-Jan-98 Zero coupon 21-Aug-20 16.9 CRISIL AAA/Stable
INE005A11309 Bonds 5-Oct-98 Zero coupon 5-Dec-22 137.9 CRISIL AAA/Stable
INE005A11531 Bonds 16-Jun-99 Zero coupon 16-Apr-23 18.3 CRISIL AAA/Stable
INE005A11341 Bonds 1-Dec-98 Zero coupon 1-May-23 57.1 CRISIL AAA/Stable
INE005A11382 Bonds 11-Jan-99 Zero coupon 11-Jun-23 40.2 CRISIL AAA/Stable
INE090A08SP8 Bonds 22-Jan-98 Zero coupon 21-Jul-26 40.4 CRISIL AAA/Stable
*CRISIL is awaiting independent confirmation of redemption before withdrawing rating on these instruments
Annexure - Rating History for last 3 Years
  Current 2018 (History) 2017  2016  2015  Start of 2015
Instrument Type Quantum Rating Date Rating Date Rating Date Rating Date Rating Rating
Bond  LT  629  CRISIL AAA/Stable    No Rating Change  21-04-17  CRISIL AAA/Stable  13-12-16  CRISIL AAA    No Rating Change  CRISIL AAA/Stable 
Perpetual Tier-I Bonds (under Basel II)  LT  518  CRISIL AAA/Stable    No Rating Change    No Rating Change    No Rating Change    No Rating Change  CRISIL AAA/Stable 
Upper Tier-II Bonds (under Basel II)  LT  8495  CRISIL AAA/Stable    No Rating Change    No Rating Change    No Rating Change    No Rating Change  CRISIL AAA/Stable 
Table reflects instances where rating is changed or freshly assigned. 'No Rating Change' implies that there was no rating change under the release.
Links to related criteria
Rating Criteria for Banks and Financial Institutions
Rating Criteria for Hybrid Capital instruments issued by banks under Basel II guidelines

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