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ICICI eyes right fit for global buy

The buzz over a possible overseas acquisition by India’s largest private sector banking major ICICI Bank is growing, with senior bank officials stating that the bank is being presented with several opportunities across the globe.

The move comes at a time when most of the bigger global players have been hit by massive write-downs and losses of over $400 billion, which have led to sharp erosion of market cap of most players. Bankers feel that the situation is likely to continue in the near future too.

Indian banks like ICICI Bank and State Bank of India have till date done only small acquisitions compared with large-scale acquisitions by Indian corporates, especially the Tata Group. Speaking to ET, ICICI Bank joint MD Chanda Kochhar said, “At this point of time, there are opportunities coming our way. We are not actively going out to look at these opportunities. However, at this point, there is nothing specific that we are looking at. To most of the opportunities, we are saying ‘no’.” She added, “We are getting these opportunities from everywhere.”

ICICI Bank currently has operations in 18 countries across the globe. The bank has a total asset of Rs 3,99,795 crore as on March 31, 2008 while its profit after tax was Rs 4,158 crore. “We are only looking at something which fits with our plans. It has to be something with a large-deposit base.

It has to be a stable-deposit base. We are not looking at a bank with a large-asset base,” said Ms Kochhar. The bank is looking at acquiring only a bank and not a mortgage player in international markets. The bank has retail banking operations in the UK and Canada. It has also recently started retail operations in Germany. It has a retail-liability base of around $5.3 billion.

Internationally, however, banks are facing a severe liquidity crunch. In most cases, there would be a huge difference between assets and their liability base. Analysts point out that it does not make any sense now to go in for an acquisition if the loan-to-deposit ratio is more than one.

Among private sector banks, ICICI Bank was the only one which had gone in for an overseas acquisition. In 2005, it had acquired a small-sized bank Investitsionno-Kreditny Bank (IKB), a closely-held Russian bank with a registered office at Balabanovo in the Kaluga region. The bank had picked up the entire equity capital of around $1.2 million. This acquisition was done to get an entry into the country. This time, however, the bank is likely to look at a larger-sized acquisition of around $1 billion.

India’s largest bank SBI, some time back, had said that it would not be interested any longer in smaller acquisitions after going through a series of small acquisitions. SBI had acquired Indian Ocean International Bank in Mauritius for $8 million, a 76% stake in Giro Commercial Bank in Kenya for $7 million and 75% majority stake in the Indonesian Bank PT Bank, IndoMonex for $5 million.

In its international operations, ICICI Bank has been focusing on being NRI-centric, building a low-cost deposit base and also on funding of Indian corporate for their acquisitions and other plans. For the first six months of the year, ICICI Bank has been ranked the number one loan syndicator by basis point. The market cap of most players has seen a severe erosion. Citigroup’s market cap has fallen by over $175 billion while Merrill Lynch has seen over $55 billion of its market cap evaporate and Lehman lost over $25 billion.
Source: Economic Times

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