Mumbai, March 4
Private sector lender ICICI Bank has been roiled by the sub-prime crisis in the US following reports that it has suffered losses to the tune of $264 million.
Shares of the bank took a beating today after minister of state for finance Pawan Kumar Bansal said in a written response to a question in Parliament that the bank had reported the marked-to-market loss to the tune of this amount.
After the bank’s shares fell by nearly 9 per cent during afternoon trades, ICICI Bank’s joint managing director Chanda Kochchar issued a statement to allay investors’ fears. The bank, she said, had earmarked $70 million for sub prime losses in the last quarter to which another $50 million may be added. The bank’s shares recovered slightly at the end of the day.
Kochchar said ICICI Bank did not have a direct exposure to sub prime assets though it was holding investment structures on behalf of the corporates.
According to Kochhar, ICICI Bank directly held securities with a face value of $1.6 billion and a subsidiary held securities worth $0.5 billion. "The face value continues to remain the same because there is no default and everybody is paying as per schedule," she said.
However, ICICI Bank’s exposure to America’s sub-prime risk also unnerved investors of other banks as well. With reports stating that other banks could be holding investments in risky assets, shares of HDFC Bank and State Bank of India took a beating as well. A number of new generation private banks, which had reported huge profits from fees for managing derivative contracts over the past few quarters, could report exposure to sub-prime instruments, it is felt.
