BRIC+
India Insights - the financial services sector
| Thursday, 31 May 2007
On our recent BRIC Study Tour to India, our 30 delegates (a mix of research analysts and dealer principals) met with a wide range of locals and ex-pats, working at the highest levels of India's financial services sector. Our overall impression was of a strong, vibrant and rapidly growing sector that is a great deal more advanced and professional than we were expecting - an impression backed up by a recent review of the sector by the Economist Intelligence Unit...
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ICICI Bank
aims for growth as the economy booms
Original article by the Economist Intelligence Unit ViewsWire | The Economist
| 2 May 2007 |
The Economist Intelligence Unit predicts that Indian economic growth will remain strong, with a resulting increasing in the demand for credit.
As one example of the growing demand for capital by Indian companies, the Unit highlights the recent announcement by India's second-largest bank, ICICI Bank, that it will raise US$5bn through public offers in the US and India where is it listed. ICICI aims to raise US$3.7bn of the new capital out of the US via an American Depositary Receipt (ADR) issue, with the remaining monies raised via a domestic share offering. It says it will use the capital to primarily finance lending to both the retail and corporate sector.
The Unit is forecasting that Indian bank lending will grow by 19-20% a year for the next three years - around 2.5 times the expected rate of GDP growth. The Unit notes that "India's buoyant economy is creating rising levels of affluence and at the same time expanding the opportunities for lending as traditionally thrift-conscious consumers become more accustomed to spending on credit... We estimate that private consumption grew by about 10% in the fiscal year ended March 31st, and that it will grow by more than 8% this year."
However, it's the corporate lending sector that is the more exciting opportunity, according to the Unit. "Indian companies are particularly expansion-minded at the moment, their confidence boosted by strong growth in their domestic markets," it writes. In particular, Indian corporates are looking to borrow to improve infrastructure and manufacturing. "The prospects for India's financial services sector over the next few years remain bright," the Unit concludes. "Growth will be driven by rising personal incomes, corporate restructuring, financial sector liberalisation and the further development of a more consumer-driven, credit-oriented culture... We forecast that total lending will rise substantially as a share of GDP, to reach 75% in 2011... [compared] with an estimated 63% last year and 54% as recently as 2000."
(Note, the full article was free to air at the time this summary was published.)
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