ICICI Bank: Finding Every Banana Peel To Slip Upon

*ICICI Bank-Finding Every Banana Peel To Slip Upon*
*CMP Rs 269*
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*I have often wondered what a commercial bank is? A financial broker that
takes the depositors money and lends to a borrower without being responsible
to either. So do these privately owned institutions deserve valuations of a
fast growing manufacturing concern, when effectively they grow only as
financial
intermediaries?*
**
*With the current collapsing state of the global financial system and the
rising extent of delinquent loans and bankruptcies, a new pseudo globally
nationalised banking structure is emerging.*
**
*ICICI Bank's functioning needs to be looked into, especially considering
that the GOI owns not even a shred of the nation's second largest bank, that
too of a bank which has found "a banana peel left-over any and everywhere to
slip upon". *
**
*Take a look at ICICI Bank Eurasia-the bank's Russian arm. ICICI has an
exposure of $ 580 mn to the Russian clientele in the form of corporate
loans, retail loans and placement with Russian Banks.*
**
*Analysts now claim that close to $ 100 mn would be the extent of NPAs so
far, add to which the Q3 profits of Rs 900 crore that ICICI Bank made from
Bond trading and investors would realise that the maths simply did not work
for this institution. Nearly a quarters profit could have been under-stated
by mis-representing the extent of NPAs at the institution.*
**
*Additionally, at the recently held 13th International Investors Conference
at Bombay, sponsored by BOA-Merrill Lynch the presenters from ICICI spoke
about growing their loan book between 0 and 5 per cent in FY09 and FY10. *
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*The effort as they called it was going to be Balance Sheet preservation.
This can be read as no further credit to be lent till old debts are
recovered. So can a private bank hope to gain double digit PEs for its stock
price when it is saddled with debts and is simply not growing?*
**
*As a pure utility, should it not fetch low single digit PEs that speak of a
suddenly high profile bank having gone sullen and morose about its own
business prospects? One that works as a pure water or power utility that you
plug in or plug out of, as and when desired? Why the atrociously high market
capitalisation for the equity of an institution that works on 6X leverage of
its own equity?*
**
*To put the facts straight*
*ICICI Bank (IBank's) asset book in Russia is much smaller than UK ($ 7.6
bn) and Canada ($ 5.2 bn). ICICI Bank Eurasia was established in May 2005,
when IBank acquired the entire share capital of Investisionno-Kreditny Bank.
The total exposure of this institution exceed $ 580 mn as of September 2008.
There is no meaningful deposit franchise in Russia and 84 per cent of total
liabilities are funded by the parent ICICI Bank. *
**
*Further ICICI Bank's stake in Russian subsidiaries works out to $ 70 mn and
another $ 30 mn of infusion may be needed in FY10, as the impression is that
ICICI Bank Eurasia may face MTM/NPL losses in excess of $ 100 mn on
its Russian assets which are scattered amongst financial, trade, metal
industry loans. Every $ 100 mn knock will negatively impact the $ 6 bn
market cap of ICICI Bank.*
**
*What investors need to look out for are more disclosures from this
institution in the coming, especially relating to its exposure to commodity
oil and gas plays in Russia, and metal plays in the CIS nations. These
disclosure alone will help put a fair price on the ICICI Bank stock. *

From A Forum:by MAVERICK