Overseas lending to blue-chip firms only, safe: ICICI Bank

Asserting that its overseas lending was insulated from defaults, ICICI Bank on Sunday said a majority of its $12 billion loans abroad are to blue-chips like RIL, L&T, Tata and Birla group entities. “These loans have been actually extended to the overseas subsidiaries of large Indian blue-chip companies and are fully secured,” ICICI Bank Joint Managing Director Chanda Kochhar said over phone from Mumbai when asked if the bank’s overseas exposure is vulnerable to global meltdown. The advances extended account for about one-fourth of loan book, Kochhar said, emphasising that the bank was well within its prudential norm. “Loans have been disbursed to companies like Reliance, Tatas and Wockhardt and these are fully secured loans,” she said, adding that these also include those like L&T and Birlas. Asked about reports that its overseas loans were not fully secured, she said, “The exposure is largely to blue-chip companies...nothing is unsecured out of that.” “We have different collaterals in different companies. Most of them have underlined cash flow in every companies. Over and above we have taken additional collaterals like cash margin, shares etc,” she added. Hit by rumours about the bank’s high exposure to distressed global firms like Lehman Brothers, ICICI Bank’s shares have plunged sharply over past few weeks and fell by about 20 per cent on Friday to Rs 364.10.
Kochhar said the credit profile of even its subsidiaries abroad was very good and stable and bank’s position have been vindicated by global rating agencies like Moody’s and S&P. While assigning a strong credit profile for ICICI Bank’s UK subsidiary, credit rating agency Moody’s has said that it “has robust asset quality ratios with no loans classified as impaired, a rather conservative investment policy and no sub-prime assets.” The balance sheet size of the UK subsidiary is USD 9 billion and USD 4.5 billion is the size of the Canadian arm, Kochhar said.
She noted that the bank’s foreign subsidiaries are well capitalised and they are in good shape. The capital adequacy ratio of its British arm is over 17%. The bank’s financial position remains strong and this fact has been already endorsed by RBI, Finance Ministry and now even global credit rating agencies, she added. Asked about the mark-to-market losses as of 30 September, Kochhar said, it is a listed company and at this point of time accounts are being finalised. As of June 30, the bank had MTM losses of about $93 million. Of this, the UK arm contributed $60 million and remaining came from Canadian subsidiary.
Source : various news reports and ICICI BANK
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