Tuesday, 4 March, 2008

ICICI Bank Loses $264 Million on Overseas Investments

ICICI Bank Ltd., India's second- largest bank, reported $264 million of costs to write down the value of overseas investments, the biggest loss disclosed by an Indian bank since the collapse of the U.S. subprime-loan market.

The bank set aside $90 million through December and $70 million will be earmarked in fourth-quarter earnings, said Chanda Kochhar, ICICI joint managing director, in a telephone interview. The rest will be set off against the bank's net worth.

ICICI slumped on the Bombay Stock Exchange, leading lenders lower on concern subprime-related losses will hurt some banks in India after infecting lenders from Germany to Australia. Japan's Takefuji Corp. on March 3 said it may lose $291 million on derivatives transactions.

So far, 45 of the world's biggest banks and securities firms have written down or lost $181 billion related to investments tied to rising defaults on U.S. home loans or to people with poor credit histories.

``The quantum of the loss comes as a surprise and has unnerved the market and traders,'' said Rajesh Jain, chief executive officer at Pranav Securities Ltd. ``Investors know from experience that such signs are always the tip of the iceberg.''

The company has the largest holdings of overseas investments among the nation's major banks and has been expanding internationally to counter slowing demand for credit in India. The value of the subprime-related investments in its $2 billion of overseas assets dropped because investors are shunning all except the safest securities, Kochhar said.

Profit Increase

The Mumbai-based bank slumped as much as 9.3 percent on the Bombay Stock Exchange after Junior Finance Minister Pawan Kumar Bansal disclosed the loss in parliament today. The shares closed 5.2 percent lower at 971.60 rupees.

Bansal said there's no sign of large-scale credit losses among Indian banks.

``Following the subprime crisis overseas, ICICI Bank's overseas operations had reported marked-to-market losses of $264.34 million on account of its exposure to credit derivatives and investments as on'' Jan. 31, 2008, Bansal said in reply to a question in parliament in New Delhi.

Indian banks don't have big enough investments overseas to warrant panic, Fitch Ratings said.

``I don't think it is a serious issue for the Indian banking industry as a whole since only a few banks have this kind of an exposure,'' said Ananda Bhoumik, senior director at Fitch Ratings. ``The market expected it to be far lower, and that's where the surprise was.''

Quarterly Earnings

ICICI Bank's profit rose 35 percent to 12.3 billion rupees ($305 million) in the quarter ended Dec. 31, the bank said in January, beating analyst estimates.

``If it's limited to marked-to-market and not credit losses, it should not affect the operations significantly,'' said Sandip Sabharwal, chief investment officer at J.M. Mutual Fund, which manages about $3 billion in assets.

State Bank of India, the nation's largest by assets, lost 2.6 percent to 1,873.95 rupees. HDFC Bank Ltd. slid 2.4 percent to 1,357.30 rupees.

Singapore's government investment funds are the single largest holders in ICICI Bank, with about a 9 percent stake. Temasek Holdings Pte, through Allamanda Investments Pvt., owns 7.6 percent, and the Government of Singapore Investment Corp. holds 1.4 percent, according to the latest regulatory filings.

``So far, no specific instance of significant losses suffered by large financial institutions in India, especially from subprime mortgages in the U.S., has been noticed,'' Bansal said in parliament.