ICICI Bank’s fiscal 2014 consolidated earnings were up 15%, broadly in line with our expectations. Net interest income (up 19%) was the primary driver, as net interest income (NIM) saw a 22-basis-point jump over last year, to 3.33%. Total loans outstanding grew by 17% (led by 23% growth in retail loans), which aided this margin expansion. Deposits grew slower at 13.4%, taking the deposit-to-loan ratio down to 0.91 from 0.93. We believe this is an area that the bank needs to focus on, to lower its cost of funding over the long term. Non-interest income grew at a disappointing 2.6%, and this is a second area of focus for ICICI, in our view.
While the bank’s insurance arms are more profitable now, with the one-time regulatory charges now behind it, life insurance profits were up 5%, and general insurance 67% from a year ago. Lower commissions and poor market sentiment have impacted sales from this business. Higher insurance profits have reflected in the better return on equity figures for the consolidated entity, which were at 14.9% for 2014, versus 14.7% for 2013. We continue to look at insurance income as one of the key drivers to push returns sustainably above our cost of equity threshold. For the time being however, we hold our economic moat rating of "none." We believe the stock is fairly valued at current prices.
Loan provisions, at 0.8% of average loans, were lower than historic averages of 1.1%. We believe provisions will move up slightly going forward, perhaps closer to the 0.9% guided by the management for fiscal 2015. With scale benefits beginning to kick in for its network of 3,753 branches, ICICI Bank’s cost-to-income ratio fell back to 38.2%, versus 40.5% last year, despite adding 653 new branches. Five hundred new branches operate in the semi-urban to rural areas, to tap the high 33% average household savings rate in India. The board approved an INR 23 per common share dividend, up 15% over the previous year.