'Don't panic, rumour baseless and malicious'
PTI
Tuesday, September 30, 2008 11:48 IST
dnaindia.com
MUMBAI: Stung by rumours that it was passing through a troubled phase, ICICI Bank on Tuesday asked its customers not to panic, saying rumours about the financial strength of the bank are baseless and malicious.
"ICICI Bank is aware that rumours are being repeatedly being circulated in certain centres regarding the financial strength of the bank.
"The bank states that these rumours are baseless and malicious," ICICI Bank CEO and Managing Director K V Kamath said on Tuesday.
The statement comes admist reports that the bank's customers were queuing up before its branches in some cities particularly in Karnataka and Andhra Pradesh fearing that ICICI were facing major financial crunch.
Debunking suggestions that there could be a 'run-on-the-bank', ICICI statement gave detailed financial position to establish that it was in a very sound position with assets of over Rs 4,84,000 crore and a networth of over Rs 47,000 crore.
ICICI Bank's wholly-owned subsidiary ICICI Bank UK Plc, as part of its normal treasury operations, has a diversified investment portfolio, Kamath said.
"ICICI Bank UK Plc has zero exposure to US sub-prime credit, and zero non-performing loans," he said.
About 98 per cent of its non-India investment book of USD 3.5 billion is rated investment grade. In addition, it holds cash equivalent instruments of USD 1.1 billion.
"As on the last balance sheet date of June 30, 2008, ICICI Bank UK Plc had a capital adequacy ratio of 17.4 per cent," he said.
ICICI Bank had few weeks back made an additional provisioning of USD 28 billion to cover its investments in the bankrupted US bank Lehman Brothers' senior bonds. This was in addition to USD 12 million provision previously made.
Kamath said ICICI Bank was profitable. "This was due to the strong core performance, which more than offset the impact of adverse debt and equity market conditions in India and globally since the second half of FY 2008."
"The absorption of the impact of current market conditions on investment portfolio valuation will not pose any challenge to ICICI Bank's capital position," he said.
ICICI Bank had a networth of over Rs 47,000 crore (over USD 10 billion) and a capital adequacy ratio of 13.4 per cent on June 30, 2008, as against the regulatory requirement of nine per cent.
"This is among the highest levels of capital adequacy in large Indian banks. This reflects the healthy capital position and comfortable level of leverage," he said. "Its banking and non-banking subsidiaries are also well-capitalised."
India Backs Major Bank [WSJ]
RBI Affirms Health of ICICI to Quell Rumors of a Run
By SUBHADIP SIRCAR and ERIC BELLMAN
MUMBAI -- The latest financial tremors shaking the U.S. and Europe reached India on Tuesday as its central bank assured depositors about the health of ICICI Bank Ltd., one of the country's biggest banks, helping to lift its share price.
The Reserve Bank of India declared the bank, India's second-largest in terms of deposits, had sufficient liquidity to cover liabilities to its depositors.
The statement followed local media reports that some ICICI depositors were withdrawing cash from ATM machines and branches.
"The RBI is monitoring the developments and has arranged to provide adequate cash to ICICI to meet the demands of its customers at its branches/automated teller machines," the central bank said.
An ICICI spokesperson said the bank had "normal" withdrawals ahead of Islamic and Hindu holidays over the next few weeks.
ICICI's stock had tumbled more than 5% early in the day to a year's low, amid rumors the bank faced financial strains. Even before Tuesday's decline, its shares had fallen more than 20% in September. Following the statement, the bank's stock price rallied to finish up 8.4%, to 534.85 rupees ($11.51) on the Bombay Stock Exchange.
While ICICI is widely considered one of India's best-managed companies, it has the largest exposure to overseas assets among Indian banks, including some debt from now-collapsed Lehman Brothers Holdings Inc. that the bank is starting to write off. Standard & Poor's has reiterated its strong rating for ICICI.
Earlier in September, ICICI said its U.K. unit holds €57 million ($82.31 million) of Lehman Brothers' senior bonds, for which it may need to make an additional provision of around $28 million. The bank already has made a provision of about $12 million for those bonds.
Although its exposure to Lehman has made bonds the focus of concern, ICICI's bond holdings are tiny compared with its overall assets, analysts said. ICICI had a net worth of more than $10 billion and a capital adequacy ratio of 13.4% as of June 30, the bank said.
Under Indian banking rules, local banks must have a minimum capital adequacy -- defined as the ratio of capital to risk-weighted assets -- of 9%.
"The absorption of the impact of current market conditions on investments portfolio valuation will not pose any challenge to ICICI Bank's capital position," the bank's managing director and chief executive K.V. Kamath said Tuesday.
He added that rumors that the bank could be struggling were "baseless and malicious."
To calm fears about how much it might be exposed abroad, the bank said its U.K. unit, ICICI Bank U.K. PLC, has no exposure to U.S. subprime debt, and asserted the unit had no nonperforming loans.
About 98% of ICICI's non-India investment book of $3.5 billion is rated investment grade and above, the bank said, adding that its U.K. unit also holds cash-equivalent instruments of $1.1 billion.
The benchmark Bombay Stock Exchange 30-Share Sensitive Index or Sensex rose 2.1% to 12,860.43. |
