Banking on India with ICICI

05/21/2019 5:00 am EST


Carl Delfeld

editor, Cabot Emerging Markets Investor

This is an excellent time to add some exposure to India to our portfolio. Investing in a leading private bank is a conservative and effective way to benefit from India’s 7% plus economic growth, states Carl Delfeld, international investing expert and editor of Cabot Emerging Markets Investor.

Institutional investors are also like adjusting their strategies to increase allocations to India as a hedge on continued fallout from U.S.-China back and forth.

India offers both a large and youthful population (50% under the age of 25) with potential “catch up” growth to China as its urbanization rate of about 30% is about where China was two decades ago.

On the financial front, there have been great strides made as many of India’s population open bank accounts for the first time.

    • In 2011, only 35% of adults in India had a bank account.
    • In 2014, this number rose to 53%.
    • In 2017, 80% of adults in India had a bank account.

And there are still 191 million Indians without a bank account. ICICI Bank Ltd. (IBN) is capitalizing on this emerging growth trend with a blend of 60% retail and 40% corporate business.

Its last quarter highlights its strength and prospects going forward. Fee income rose 15% year over year. Retail loans were up 22% and core-operating profit surged 26%. The bank has a healthy net interest margin of 3.72% and non-performing loans were down 50%.

It is interesting that 95% of ICICI’s retail banking transactions are done digitally—outside of a branch. This lowers costs and boosts margins.

In addition to banking, ICICI has a joint venture with Prudential with an 11% share of a market estimated to be greater than $250 billion. Life insurance premiums were up 16% in the last quarter year over year.

This is a solid bank in a promising market. For now, we recommend buying one half of our intended position in the stock.

Subscribe to Cabot Emerging Markets Investor here…

Related Articles on GLOBAL

Keyword Image
Is China in a Recovery?
03/31/2020 11:25 am EST

China is the first country to suffer from the Coronavirus, will they be first to recover, asks Joe P...