from few days axis is also falling in the same ways.intraday it was down more that 8%.

ICICI may see more MTM loss Apr-Jun as global credit spreads widen

Tuesday, Mar 4

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By Suvashree Ghosh

MUMBAI - ICICI Bank may have to make more mark-to-market losses in the first quarter of 2008-09 (Apr-Mar), as credit spreads globally may widen further, said Joint Managing Director and Chief Financial Officer Chanda Kochhar today.

"MTM (mark-to-market) losses will be there for sometime," Kochhar told reporters after clarifying about the extent of the bank's subprime exposure and the impact on balance sheet.

The credit spreads have widened by 300 bps in the last eight months. There will be marginal hit, to the extent of single digit in percentage terms on the full year's net profit for providing on the MTM losses," Kochhar said.

Kochhar clarified that the bank had not incurred any credit loss and the mark-to-market loss was due to the increase in credit spreads. "There is no subprime credit loss. Since we hold these exposures as securities and not as loans, we have to mark-to-market," Kochhar said. The borrowers under his category are mostly Indian companies and the assets will be recovered after four years, that is, after these loans mature, she said.

The country's second largest lender's exposure in credit derivatives is $1.6 bln and in its U.K. and Canada subsidiaries the exposure is $500 mln, she said.

The bank has stopped taking exposure in the securitised market as "it creates a lot of volatility in P&L (profit and loss)," Kochhar said. Kochhar was clarifying after Minister of State for Finance Pawan Kumar Bansal today said ICICI Bank's overseas operations had reported MTM losses of $264.34 mln on credit derivatives and investments as on Jan 31. ICICI Bank shares fell to a day's low of 930 rupees after Bansal's announcement, but recouped some losses and at 4PM the shares were trading at 970.10 rupees, down 5.13% from Monday on National Stock Exchange.

"We have provided $90 mln for mark-to-market losses in December and will provide another $70 mln in this quarter (Jan-Mar). The remaining $100 mln is investments where we have not marked to market, as we have not sold these investments. It is just a balance sheet entry, which we did in December quarter," Kochhar said.

Out of the $90 mln, $50 mln is the MTM loss incurred by the bank and $20 mln is incurred by the bank's subsidiaries in U.K. and Canada. Meanwhile, the bank's credit growth in the last quarter was on expected line, though the mix is now shifting towards corporate loans, Kochhar said.

"The composition in credit is different, unlike that we used to have earlier where the retail segment showed very strong growth. Now, we are seeing robust growth in the corporate sector as well," she said. ICICI Bank expects its credit growth at 25% in the current financial year.  End

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Out of context of this thread, everyone must be knowing how NDTV had come out with a report sometime back on certain pvt. banks had exposure to huzzzzeeeee derivative losses. Axis, Kotak and Yes Bank were metioned...but ICICI Bank was conveniently left out!

Excerpts from CNBC-TV18’s exclusive interview with Chanda Kochhar:

Q: Could you lineout what this is all about and whether indeed there will be a Mark-to-Market loss that ICICI Bank will have to take this quantum?

A: First let me clarify that there is no loss this quantum. Second, there is no loss on account of any http://www.moneycontrol.com/india/news/business/q4-hit-estimated-at-50m-only-not-264m-icici-bk/23/50/329030# -  

Devesh, no European bank has touched the same toxic material since 25-July (7-Months), which this thing Sub-prime first surfaced in Germany. The main concern stems out from what they had did earlier. Also, you still believe on what they “say”.

A friend nails it. Its a must read IMO and is most logical peice backed by evidence from "Hum Hain Na" statements........

Great to hear that. It is always a lovely feeling to get into someone like that - especially when you are on the net.

That’s four times the estimates; but analysts say share remains a ‘buy’

MUMBAI: ICICI Bank’s investments in credit derivatives could be four times previous estimates at $6 billion, analysts said on Wednesday.

“ICICI Bank has clarified that there is some more exposure at its 100% owned international subsidiaries. In fact, its total exposure works out to $6 billion ($2.2 billion in credit derivatives and the rest in fixed income instruments),” Morgan Stanley’s Anil Agarwal, Anil Bang and Mansi Shah, said in a note to clients.

The trio warned that though the underlying credit quality on these instruments remains strong, ICICI’s mark to market losses could rise as global credit conditions are likely to worsen.

“ICICI Bank’s subsidiaries in the UK and Canada have invested $500 million in credit derivatives and taken a loss of $35 million as of January. Moreover, they have a fixed-income book of $3.8 billion, which is a bit out of money,” Agarwal, Bang and Shah said.

Suresh Ganapathy, analyst with Deutsche Bank, told DNA Money feels ICICI could recover the losses in the next two years when yields stabilise.

“But obviously all those having international operations are vulnerable because credit spreads are likely to be volatile in the next few months and one must also remember it is pre-election time here in India,” Ganapathy said

The dynamics may force the bank to alter its international strategy, say some. That’s because the global businesses, despite being large, have become far more risky due to the credit contagion and offer low returns.

Mahrukh Adajania of UBS expects ICICI to provide an additional $75 million for the fourth quarter in its balance sheet.

“The total additional exposure of $4.3 billion after netting of mark to market provisions of $265 million amounts to Rs150 per share of ICICI Bank,” Adajania said in another note.

The ICICI Bank stock shed 1.15% on Wednesday to end at Rs 960.

Interestingly, not a single analyst has yet given a ‘sell’ call on the share. Most of them have retained their 12-month price target between Rs 1,300 and Rs 1,550.

JP Morgan analysts Sachin Sheth, Sunil Garg and Amit Premchandani said at current valuations, the stock remains attractive.

“We believe it is time to buy at these very cheap valuations, given upcoming branch openings, medium-term improvement in low-cost deposit mix, tapering off of non performing loans, and bottoming out of retail growth,” they wrote.

The State Bank of India, Bank of India and Bank of Baroda are three other Indian banks with a sizeable international operations.

Late on Wednesday, Bank of Baroda said its total investment in credit-linked notes “is only $329 million (Rs 1,296 crore) as on December 31, 2007.”

The bank said full provisioning has been made as per prescribed norms.

“The outstanding provisioning as on December 31, 2007, was only $2.808 million (Rs 11.06 crore). If these investments are marked to market as of February 29, 2008, there would be additional provisions of $2.50 million or Rs 10 crores approximately as credit spreads have widened,” the bank said.

If I remember correctly, GoI/RBI have recognized 3 private entities ICICI, HDFC Bank and Reliance Capital as entities which can not be allowed to fail.

A case of being too big to be allowed to fail.

The newspaper quoted Minister of State for finance Pawan Kumar Bansal as saying the state-run bank's loss came from investments being marked to market and it was a notional loss.

Earlier this month, the minister told parliament that following the subprime crisis, ICICI Bank, India's top private-sector bank, had reported a marked-to-market loss of $264.34 million from its credit derivatives and investments as on Jan. 31 of this year.

U.S. bank stocks may rise 10-20 pct in year: Barron's

NEW YORK (Reuters) - Shares of stronger U.S. banks and brokerages may rise 10 percent to 20 percent in the next year as panic over credit markets recedes and earnings improve, Barron's said in its March 24 edition.

The sector will still face negative headlines such as finance company's CIT Group Inc decision on Thursday to tap an entire $7.3 billion credit line, and perhaps see weaker banks go bust or seek bailouts, Barron's said.

But this month's collapse of Bear Stearns Cos may have marked a bottom for the broader market, Barron's said. Bear agreed on March 16 to a buyout by JPMorgan Chase & Co at a fire-sale price of $2 per share.

Banks have suffered from lower earnings and share prices, hurt by the slowing economy, the housing crunch, an increase in soured loans, and illiquidity in a wide range of debt. Many industry executives and economists have said they expect conditions to remain tough for much of this year, or longer.

Longer-term investors bruised by losses could be forgiven for being unexcited about a 10 percent to 20 percent gain.

Despite an 11 percent jump last week, the 24-member Philadelphia KBW Bank Index would have to rise an additional 41 percent to reach its February 2007 peak. And the Amex Securities Broker-Dealer Index , which includes Bear, would have to soar 65 percent to reach its May 2007 peak.

Barron's said a main reason that bank and brokerage fortunes will improve is the large gap between the yield on the 2- and 10-year U.S. Treasury notes, now about 1.72 percentage points according to Reuters data.

This "steep yield curve" makes it easier for banks to borrow short-term money at low rates and lend long-term at higher rates, and suggests the economy may be well along in a recession rather than early in one, Barron's said.

Earnings may also grow faster if the bulk of write-downs for such things as subprime mortgages, collateralized debt obligations and leveraged loans is in the past.

Though first-quarter earnings in the sector may fall by nearly half, third-quarter earnings may rise 34 percent, Barron's said, citing Standard & Poor's analyst Howard Silverblatt.

Goldman Sachs Group Inc , Lehman Brothers Holdings Inc and Morgan Stanley each reported lower earnings last week, but results were better than analysts expected, and Barron's said write-downs were manageable.

While several analysts have said Citigroup Inc may face a write-down in excess of $10 billion, they have projected it may be smaller than last quarter's $18.1 billion.

And having a friendly central bank also helps the sector, Barron's said. The Federal Reserve this month slashed interest rates, and opened its lending window to investment banks, giving them a new and stable source of funding.

(Reporting by Jonathan Stempel, editing by Richard Chang)

Copyright 2008 Reuters

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