The Hindu Business Line : Growth will be robust, no cause for concern: K.V. Kamath

ICICI Bank has announced the details of its public offer. The issue will open from December 1-6. The price band will be announced on November 30. The Managing Director and CEO of ICICI Bank, Mr K.V. Kamath says that the ICICI Bank strategy is very simple. "We do not price at a loss. We work on the cost of funds and the intermediation cost," says Mr Kamath.

Excerpts from CNBC-TV18's exclusive interview with Mr Kamath:

Can you take us through the details of the ADS? Does the ADS start off at the same time as the domestic offer?

Both issues are on at the same time in different markets. The domestic issue is about Rs 5,000 crore and the ADS is around Rs 2,000 crore.

We understand that there will be a public offering without listing for Japanese investors. Why are you going into this market and is there any percentage reserved for them?

We are doing a road show in Tokyo, with the Japanese offering as part of ADS. There will be no percentage reserved for them. It will be a part of the ADR issue. We are going to the Japanese market at this time for the diversification of the investor base. We have a well-diversified investor base in the western world and South East Asia, but we have very little shareholding from Japan. Japan is a resurgent economy today and it is appropriate that investors look at this base as a long-term source.

What is your capital adequacy and what will this increase to?

Our total capital adequacy today is a little over 11 per cent. Tier1 capital adequacy is about 7.25 per cent. The tier 1 capital adequacy will be under 13 with this issue and the total capital adequacy, if I were to raise tier 2, could be around 16-17 per cent.

ICICI Bank is tapping the market every other year. What kind of assurance can you give to your investors?

Bank capital needs to be looked at in three contexts. One is their own growth opportunity. Second, what the bank believes is the opportunity, given the economic environment and third, the regulatory stance.

From the regulatory front, clearly the Reserve Bank has said that Basel II was on us. That is what motivated us to make an issue at this point of time. To prepare ourselves for Basel II and a stricter, tighter regulatory environmentAs far as our own growth is concerned, we have our past record to show how we have grown. That also gives an indication on what we could do in the future.

What kind of time frame are you expecting on the return of equity?

I think return on equity is not the only concern. In investors mind, there are several other concerns. There is a concern about the break-up value and the EPS growth. There is also concern about the overall growth of the bank.

I think the fourth component will be the return on equity. On all accounts, the growth will be very robust, while return on equity may take a slight dip for a little while. But in the next 18 to 24 months, we would be there, where we want to be.

Going forward as deposit advantage also reduces; do you see a severe pressure on your margins?

I want to put things in context. Banks, which only believe in margins, are taking a wrong path. Net interest margins, indeed are important, fee income is even more important.

As for as borrowing costs and lending rates are concerned, we are market leaders. We price products appropriately. We do not price at a loss.

But the big driver for ICICI Bank in the last two years has been our ability to grow the fee income. That will continue. I tell my team that as far as the fee income is concerned; we have just built the foundation for a robust growth. We will continue to explore opportunities in fee income.

Similarly, using technology is an opportunity to cut operating expenses, we will try that. On the risk front, we have already seen the merits or the impacts of driving the non-performing loans (NPLs) down. That will again continue to reflect in Profit and Loss. I think you have to look at the ICICI story considering all these things in a holistic manner.

So both on margins and on volumes, there is no concern for growth?

Not in our mind. Four years ago, we did not have two retail brands. We had neither the products nor the distribution. We also did not have technology in the measure that we needed. The market was in an initial stage but we took a call that this market was going to happen.

We needed to build this team or individual components to deliver on the opportunity and we have done it. So today's challenge is only a small fraction of that. I am not worried about that.

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