e-ISSN: 2582-5208

International Research Journal of Modernization in Engineering Technology and Science

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Volume:06/Issue:05/May-2024 Impact Factor- 7.868 www.irjmets.com

FINANCIAL PERFORMANCE ANALYSIS OF ICICI BANK: A CAMEL

MODEL APPROACH
Prof. Nidhi N. Somani*1, Ms. Easha Raja*2, Prof. Chaitanya A. Sakhare*3
*1,3Assistant Professor Department Of Business Administration Dr. Ambedkar Institute Of
Management Studies & Research, Nagpur, India.
*2Assistant Manager, ICICI Bank, Mayur Colony, Pune, India.
ABSTRACT
The Indian banking sector serves as a cornerstone of the nation's economy, assisting financial stability and
fostering economic growth. It provides money, the lifeblood of the economy, which promotes economic
development by promoting and supporting industry expansion across the board. One of the sectors in India that
is expanding the fastest is banking. An essential tool for assessing the state of the economy as a whole is the
performance evaluation of banks. With a global presence spanning 17 countries and a comprehensive suite of
banking products and services, ICICI Bank exemplifies innovation, reach, and customer-centricity. In this
regard, an assessment of the financial performance of ICICI Bank, the biggest private sector bank in India, has
been conducted. As of April 2024, ICICI Bank is second with a market cap of ₹7.78 lakh crore. The principal
objective of this study is to determine the ability to pay interest and the earning capacity or profitability.
CAMEL analysis was used to measure the financial performance. Utilizing specific financial ratios and
performance indicators, the research aims to provide insights into ICICI Bank's strengths, weaknesses, and
areas for improvement. It will be beneficial in giving management relevant data, such as business efficiency.
Preliminary findings suggest notable strengths in ICICI Bank's earnings capacity and management efficiency,
marked by steady improvements in profitability metrics and resource utilization. However, challenges persist
in asset quality management and maintaining adequate capital adequacy, as evidenced by fluctuations in key
ratios such as Net NPA to Net Advances and Capital Adequacy Ratio.
Keywords: ICICI Bank, CAMEL Analysis, Financial Performance, Operating Efficiency, Earnings Capacity,
Grading Methodology, Banking Sector.
I. INTRODUCTION
The Indian banking sector is the fundamental component of the nation's economy and is essential to the
country's financial system's stability. Banks are financial organisations that take public funds and lend money
to businesses, industries, and the general public. Because of their involvement in the payment and settlement
processes, the transmission of monetary policy, and the intermediation of credit, banks are essential to the
operation of every economy. Government operations and the flow of commodities and services are made easier
by financing. Additionally, it supplies the nation with a sizable amount of its medium of exchange. The health of
the banking industry can be accurately gauged by looking at how other economic sectors are doing. The CAMEL
Model is one such tool. The Camel model is a useful tool for comprehending the bank's financial situation and
making appropriate recommendations for how to strengthen its weaknesses. Global attention has been focused
on the performance of banks, and more especially, on their solvency or lack thereof. A supervisory rating
system called the Camel model was created in the US to categorise banks. On the basis of the Padmanabhan
Committee's recommendations, the RBI of India adopted this strategy in 1996.
ICICI Bank is another major player in the Indian banking business, known for offering a wide range of financial
services and innovative banking solutions. Initiated by the World Bank, the Indian government, and business
leaders, ICICI was established in 1955. In 1994, ICICI Bank was established as a division of the ICICI
organisation. ICICI was the first bank or financial organisation from outside of Japan Asia and the first Indian
corporation to list on the New York Stock Exchange in 1999.
It is the second bank in India to reach the ₹8 trillion milestone and make it into the top five market-value
corporations. India's second-biggest private lender is ICICI Bank. ICICI Bank is present in 17 countries and has
6,000 branches and 17,000 ATMs in India as of April 27, 2024. Retail, corporations, and rural customers can
choose from a wide range of banking products and services offered by ICICI Bank. Retail banking services
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International Research Journal of Modernization in Engineering Technology and Science
( Peer-Reviewed, Open Access, Fully Refereed International Journal )
Volume:06/Issue:05/May-2024 Impact Factor- 7.868 www.irjmets.com
include current and savings accounts, credit cards, loans, investment options, insurance, and wealth
management are all offered. In addition, the bank offers its clients corporate banking, investment banking,
trade finance, project finance, and treasury solutions. Prominent in the Indian banking scene, ICICI Bank is
renowned for its extensive worldwide reach, innovative digital offerings, and varied range of products.
II. REVIEW OF LITERATURE
The performance of Axis Bank and ICICI Bank has been evaluated using the CAMEL model in several studies.
Raj (2023) found that Axis Bank ranked second, while ICICI Bank ranked third. Jha (2021) also ranked ICICI
Bank higher than Axis Bank, with the former being ranked first and the latter second. However, Devanadhen
(2013) and Bodla (2006) both found that ICICI Bank's performance was not as strong as that of Axis Bank.
Devanadhen (2013) ranked Axis Bank higher than ICICI Bank, and Bodla (2006) found that ICICI Bank lagged
behind SBI in terms of asset quality, earning quality, and management quality. These studies collectively
suggest that while ICICI Bank's performance is generally strong, Axis Bank consistently outperforms it in the
CAMEL model evaluation. Anjali Singh (2022) conducted a study titled "Performance Evaluation of Indian
Banking Sector Post-Global Crisis using CAMEL Ratios". The research aimed to assess the financial performance
of three major banks (HDFC, SBI, and PNB) utilizing the CAMEL rating model. Secondary data and tools such as
asset and revenue quality were employed by the researcher. The findings revealed that HDFC Bank
demonstrated superior efficiency compared to the other banks evaluated. Jaiswal and Jain (2016) observed
that SBI has a better market position than ICICI in terms of earning per share, price ratio per share, and
dividend payout ratio; however, ICICI bank performs well in terms of NPA in contrast to SBI bank.
IV. RESEARCH METHODOLOGY
 OBJECTIVES OF THE STUDY
• To examine the financial performance of ICICI bank using the CAMEL model
Period of the study: This study covers 5 years of data (2019 to 2023) pertaining to ICICI bank.
 Data Collection: The present study is based on Secondary data. The annual reports of the ICICI bank for the
fiscal years 2019-20 through 2022-23 were gathered from the RBI website, as well as various bank
publications and research articles.
 Data analysis: The CAMEL technique has been used to evaluate the financial soundness of the bank. The
CAMEL Model, which assesses capital adequacy, asset quality, management efficiency, earnings, and
liquidity, is used to analyse data. Specific ratios and overall rankings are calculated. The banks are ranked
based on the scores of each of the CAMEL components, and the ratios are given weights by the CAMEL
rating. The final score is obtained by summing each component of the CAMEL model after all the
components and ratios have been computed. A bank with a higher score is considered better.
V. RESULTS AND ANALYSIS
In this section, we will assess the financial soundness of the selected banks using the CAMEL framework. The
indicators selected for analysis are chosen based on their analytical significance, data availability for
compilation and calculation, and relevance to the investigation. Only indicators deemed suitable for the study
are included. The selected indicators for each CAMEL acronym are listed in the table below.
 Capital Adequacy
Capital adequacy is a key determinant of a bank's financial stability. This indicator assesses the bank's financial
position and management's ability to supply extra cash while maintaining investor confidence. It consists of
Tier I and Tier II capital. To determine it, divide the bank's quality by its risk-weighted assets. Typically, this
ratio is stated as a percentage. A greater ratio indicates a company's ability to withstand unexpected losses
owing to capital shortages.
The ratio is expressed as a percentage; a larger percentage is typically indicative of safety. A low ratio suggests
that the bank lacks the capital necessary to cover the risk attached to its assets, making it vulnerable to failure
in any unfavourable crisis like something that occurred during the recession. A very high ratio could mean that
the bank is not lending to its clients in an efficient manner using its capital (Accounting tools, 2021).

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Volume:06/Issue:05/May-2024 Impact Factor- 7.868 www.irjmets.com
It is a measure of bank’s core
(Tier 1 capital +Tier 2 capital) capital and is expressed in the form of
Capital adequacy ratio
Risk weighted capital a percentage. The higher the ratio it is
considered as better
This ratio indicates the
Total Advances to Net Total advances aggressiveness of the banks’
Assets Ratio Total Assets lending which results in
profitability.
This ratio shows the relationship
Total Debt
Debt Equity ratio between the company’s total debt and
Total Shareholder’s equity
total shareholders fund
Capital Adequacy Ratios from 2019-2023
2019 2020 2021 2022 2023 Mean (μ)
Capital Adequacy ratio 16.89 16.11 19.12 19.16 18.34 17.924
Total Advances to Net
59.63 60.87 60.87 64.36 64.36 62.018
Assets ratio
Debt Equity ratio 7.77 8.24 7.09 7.01 6.6 7.342
This area's ratio indicates the bank's ability to turn a profit and generate revenue. Generally speaking, banks
benefit from increased capital adequacy ratios. According to the above table, the ICICI Capital Adequacy Ratio
was 16.89 in 2019, decreased to 16.11 in 2020, increased to 19.12 and 19.16 in 2021 and 2022, decreased to
18.34 in 2023 respectively. This indicates that the ratio was at its highest in 2022, as the bank had sufficient
capital in that year to handle unforeseen losses in comparison to previous years. However, it decreased to 18.34
in 2023 to indicate that the bank lacked enough capital for the risk associated with its assets compared to
2021–22. The debt-to-equity ratio was 7.77 in 2019, 8.24 in 2020 and 7.09 in 2021. It decreased to 7.01 in 2022
and then decreased to 6.6 in 2023 because the bank employed less debt in 2022–23 than it did in 2019–20. A
low ratio suggests that banks will employ more equity than debt in 2023, giving creditors an increased safety
cushion. The advance to asset ratio was 2.85 in 2015 and increased steadily to 2.98 in 2019. The reason for this
increase is that the bank issued more advances and had very little liquidity in 2019. The advance to asset ratio,
as we all know, calculates the entire amount of outstanding loans as a proportion of total assets. The higher this
ratio is, the more leveraged and less liquid a bank is. The riskier a bank may be to more defaults, the higher the
ratio. The percentage of total investments in government securities was 60.87 in 2020 and 2021, 64.36 in 2022
and 2023, and 59.63 in 2019. Therefore, a high CAR suggests that the organisation can handle more business.
CAR is constantly evaluated from the perspective of regulatory standards for each line of activity in the financial
services industry. A lower CAR indicates a weaker capacity to absorb losses. All things considered, this ratio
indicates that the bank performed better from 2022 to 2023; but, from 2019 to 2021, it is mediocre.
 Asset Quality
Asset quality refers to an institution's loan quality, which impacts its earnings. Assessing asset quality entails
balancing investment risk considerations against capital earnings. This demonstrates the bank's stability when
faced with specific threats.

Net NPA Lower the ratio it indicates the better

Net NPA to Net advances
Net advances given credit efficiency of the bank

Total Investments to Total Investment Higher the ratio the adversity increases
Total Assets Total Assets towards the profitability of the banks

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( Peer-Reviewed, Open Access, Fully Refereed International Journal )
Volume:06/Issue:05/May-2024 Impact Factor- 7.868 www.irjmets.com

Net NPA to Total Assets Net NPA *100 Lower the ratio, better is the
ratio Total Assets performance of the banks

Asset Quality Ratios from 2019-2023

2019 2020 2021 2022 2023 Mean (μ)
Net NPA to Net
2 1 2 0.51 2 1.502
advances
Total Investments to
0.22 0.23 0.23 0.22 0.23 0.226
Total Assets
Net NPA to Total
0.741 0.491 0.493 3.251 0.325 1.0602
Assets ratio
This section examines the quantity of depreciated and doubtful loans as well as the quality of the bank client
portfolio. Lower asset quality ratios are generally preferred. According to the following table, ICICI's net non-
performing assets to total advances ratio was 2 in 2019, decreased to 1 in 2020, increased to 2 in 2021,
decreased to 0.51 in 2022 and increased to 2 in 2023. These results indicate a poor credit performance of the
bank in 2020 and 2022. This is because the bank did not make enough provisions against non-performing
assets. As this ratio typically shows how well a bank provides for its customers, a lower ratio is indicative of a
bank that provides very good credit. A greater ratio indicates poor bank performance. Therefore, the bank's
performance in 2019, 2021 & 2023 is not as good as it was in 2020–2021. The ratio of total investments to total
assets in 2019 is 0.22. From then, it increased to 0.23 in 2020 and 2021, and decreased to 0.22 in 2022, then
increased to 0.23 in 2023. Therefore, a low ratio suggests that the bank is concentrating more on its primary
business in 2019–20, which is advances. Conversely, a higher ratio means that the bank has prudently
maintained a sizeable investment buffer to protect against likely non-performing assets. But this has a negative
impact on its profitability as well.
 Management Efficiency
Banks' managerial efficiency cannot be measured using standard parameters. This parameter measures the
bank's senior officers' capacity to make sound decisions. It improves bank quality and promotes long-term
growth. Management assesses whether banks have achieved their growth targets. The CAMEL model suggests a
few ratios for measuring efficiency.
Helps to assess the bank’s liquidity by comparing the
Total advances to total Total loans/Total
banks’ total loans to total deposits during the period.
deposits ratio deposits
Higher the ratio it is better
Business /No. of
employees Denotes the productivity and how efficiently a bank
Business per Employee
(Business= Advances + utilizes its employees. Higher the ratio it is better
deposits)
How efficiently a bank is utilizing its employees to
Net Profit/ No. of
Profit per Employee generate profits. Higher
employees
the ratio it is better.
Management Efficiency ratios from 2019-2023
2019 2020 2021 2022 2023 Mean (μ)
Total advances
to total 78.68 80.69 80.69 86.35 86.35 82.552
deposits ratio
Business/ 14,28,68,072 14,25,96,981 16,87,34,303 18,17,38,412 17,37,31,170 16,19,33,788
Employee .08 .88 .89 .40 .26 .10
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Net Profit/
3,87,642.38 7,98,519.16 16,39,765.48 22,05,083.96 25,18,276.98 15,09,857.59
Employee
This ratio examines into the bank's ability to make enough profit to run its primary businesses. This ratio must
to be below 100 percent but yet not negative, as that would indicate that the bank's operating margin is already
negative. According to the following table, the ratio of total advance to total deposit reached its peak in 2022
and 2023 at 86.35. The ideal loan to deposit ratio is often between 80% and 90%, signifying that in all years
except 2019, the bank was able to pay both customer loans and withdrawals. In 2019, the business per
employee was 14,28,68,072.08, and from that year until 2023, it increased steadily. This ratio shows how
effectively all bank employees generate business for the bank; in other words, employees in 2023 were more
productive than those in 2019, This ratio shows how effectively workers produce profit for the bank. The
efficiency of employees will increase with a higher ratio.
 Earnings capacity
Earnings capacity: A bank's ability to generate earnings to sustain operations, expand, and remain competitive
is a vital component in determining its legitimacy. This indicator considers the bank's earnings, growth,
stability, valuation allowances, net margins, and asset quality.
Reveals the amount of money bank is
Net Interest Investment Income - Interest
earning via the loans compared to the
Margin expenses /Average earning Assets
interest bank is paying on deposits
Measures the percentage of a company’s
Net Profit Margin Net Profit/Revenue X100
revenue
Return on Net Denotes the profit earning capacity of the
Worth / Equity Net Income/Shareholder’s Equity company on a shareholder’s invested
amount.
Earnings capacity ratios from 2019-2023
2019 2020 2021 2022 2023 Mean (μ)
Net Interest
2.8 3.02 3.16 3.36 3.92 3.25
Margin
Net Profit
5.3 10.6 20.46 27.02 29.2 18.516
Margin
Return on Net
Worth / 3.19 6.99 11.21 13.94 16.13 10.292
Equity
Based on the above table, the net interest margin, which reflects the efficiency of managing interest income and
expenses, displays an increasing trend over the five years. Starting at 2.8% in 2019, it gradually rises to 3.92%
in 2023. This suggests a progressive improvement in effectively leveraging interest-related operations to
generate income. Similarly, the net profit margin, representing the proportion of net income relative to total
revenue, exhibits a significant upward trajectory from 2019 to 2023. Beginning at 5.3% in 2019, it climbs to
29.2% by 2023. This surge indicates a substantial enhancement in profitability, potentially driven by increased
revenue or improved cost management. The return on net worth or equity, which signifies the profitability
generated in relation to shareholders' equity, demonstrates a consistent rise throughout the observed period.
Starting at 3.19% in 2019, it increases to 16.13% in 2023. This steady increase implies enhanced efficiency in
generating profits relative to the equity invested.
 Liquidity
Banks' liquidity reflects their ability to meet financial obligations. Low liquidity might hinder bank expansion
and ability to satisfy current liabilities. If a bank's liquidity is too high, it may not be able to fully utilise its cash,
leading to decreased profitability.
Therefore, an equilibrium must exist between these two positions.
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International Research Journal of Modernization in Engineering Technology and Science
( Peer-Reviewed, Open Access, Fully Refereed International Journal )
Volume:06/Issue:05/May-2024 Impact Factor- 7.868 www.irjmets.com
Reveals the liquidity position of
Liquid Ratio Liquid Assets/Current Liabilities
the bank
Indicates the efficiency of the
Current Ratio Current Assets/Current Liabilities
usage of the assets
Reveals how much core funds of
Cash to Deposit Ratio Total Cash/ Total Deposits
the bank are used for lending
Liquidity ratios from 2019-2023
2019 2020 2021 2022 2023 Mean (μ)
Liquid Ratio 18.66 15.76 14.52 14.26 13.94 15.428
Current Ratio 0.12 0.09 0.07 0.06 0.06 0.08
Cash to Deposit
5.85 5.14 4.77 5.32 5.73 5.362
Ratio
The liquid ratio measures a company's ability to pay off its short-term liabilities with its most liquid assets. The
trend shows a decrease in the liquid ratio from 18.66 in 2019 to 13.94 in 2023. This decline suggests a
reduction in the proportion of liquid assets relative to short-term liabilities over the years, potentially
indicating a decrease in financial flexibility or an increase in short-term obligations. The current ratio assesses
a company's ability to cover its short-term liabilities with its short-term assets. The data indicates an extremely
low current ratio, decreasing from 0.12 in 2019 to 0.06 in 2023. Such low values suggest a significant imbalance
between current assets and liabilities, raising concerns about the company's short-term solvency and its ability
to meet immediate financial obligations. The cash to deposit ratio evaluates the proportion of cash reserves to
total deposits. Despite minor fluctuations, the ratio remains relatively stable over the years, ranging from 4.77
to 5.85. This stability suggests a consistent level of cash reserves in proportion to total deposits, which can
indicate careful liquidity management.
VI. CONCLUSION
The evaluation of ICICI Bank's financial performance using the CAMEL model over the period from 2019 to
2023 reveals important insights into the bank's operational efficiency, risk management, and overall stability.
While the bank exhibited strengths in earnings capacity and management efficiency, with noticeable
improvements in profitability metrics and resource utilization, challenges persisted in asset quality
management and maintaining adequate capital adequacy. Fluctuations in asset quality indicators, such as the
Net NPA to Net Advances ratio, highlighted inconsistencies in credit performance management. Moreover,
declining trends in liquidity ratios, including the Liquid Ratio and Current Ratio, raised concerns regarding
financial flexibility and short-term solvency. Despite these challenges, ICICI Bank's stable Cash to Deposit Ratio
indicated prudent liquidity management practices. Moving forward, strategic focus on enhancing asset quality
management and bolstering capital adequacy will be imperative for ICICI Bank to circumnavigate uncertainties
and maintain its position as a key player in the Indian banking sector.
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( Peer-Reviewed, Open Access, Fully Refereed International Journal )
Volume:06/Issue:05/May-2024 Impact Factor- 7.868 www.irjmets.com
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