ICICI Bank reels under market rumors; RBI, FinMin come to its rescue
India's largest private sector bank, ICICI Bank, stung by rumors that it was passing through troubled times due to its exposure to fallen financial giant Lehman Brothers, issued a clarification on Tuesday saying its financial position was very sound even as the central bank and finance minister rushed to its rescue, by making public statements that it was well capitalized and had sufficient liquidity.
ICICI Bank, which has the biggest overseas securities holdings among banks in India, issued a statement, saying it had a capital adequacy ratio of 13.4 percent as of June 30, against a regulatory requirement of 9 percent. The bank said this is among the highest levels of capital adequacy in large Indian banks and reflects the healthy capital position and comfortable level of leverage. The bank's banking and non-banking subsidiaries are also well capitalized, it said.
The bank said its profit after tax stood at over $900 million in the last fiscal year ended March, while the profit after tax for the 1st quarter ended June stood at over $155 million. This was due to the strong core performance, which more than offset the impact of adverse debt and equity market conditions in India and the global markets since the second half of the last fiscal year, the bank said.
The bank said it had a "very strong capital position" with consolidated assets of over $105 billion and net worth of over $10 billion.
The bank said its assets of more than $105 billion were diversified "across a wide range of asset classes in India and overseas."
The absorption of the impact of current market conditions on investment portfolio valuation would not pose any challenge to its capital position, the bank added.
The bank's clarification came amid rumors that the top management were selling its shares and reports that the bank's customers in Andhra Pradesh and Karnataka were queuing up in hundreds and withdrawing their deposits and savings in anticipation that the bank would close shop soon.
The bank said it has demanded a probe by regulator SEBI and the government to bring the conspirators to book.
ICICI Bank's troubles began when, earlier this month, Wall Street's fourth largest investment bank Lehman Brothers, a victim to subprime market losses and credit crunch, filed for bankruptcy, selling parts of its business to Barclays and Nomura.
Soon thereafter, ICICI Bank said its wholly-owned UK subsidiary had exposure to 57 million ($81 million) of Lehman Brothers senior bonds, though it added that the potential losses were not material. It said it would increase its provision on the debt by about $28 million to cover half of that exposure.
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