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ICICI in more trouble?


From Sify, in March 2008:

ICICI Bank’s investments in credit derivatives could be four times previous estimates at $6 billion, analysts said on Wednesday. Budget 2008-09

“ICICI Bank has clarified that there is some more exposure at its 100 per cent 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.

I don’t know if the $6 billion estimate is ICICI’s – the article indicates it is that of the analysts, which I wouldn’t quite trust. But if it’s true, the markets have actually tanked more, and fixed income market values are down due to rising interest rates everywhere.

Another interesting bit is this:

The ICICI Bank stock shed 1.15 per cent 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.

Current quote for ICICIBank: Rs. 530. Can’t trust predictions.


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