Beleagured ICICI Bank....

Unbelievable!
ICICI Bank is down 26% for the week ending 10/10/2008, and around 75% down from its all time high made in Jan 2008!
Its down around 60% from its secondary offering made in July 2007.

Here is another statistic, its price to book value is now less than 1! Market cap is now below Net worth (Reserves + Share Capital)

Is it an unfortunate victim of the general global lack of confidence in financial institutions - IDFC, who has one of the most pristine asset quality is also down 70% for the calendar year! - or is there really something specific to worry about.

Assurances have been given by everyone, right from K V Kamath to Chanda Kochhar to P Chidambaram to RBI about the health of the bank. Those assurances have to be taken with a pinch of salt, no one in their right mind in government would go out and say that there is a problem with the nation's second largest bank.

Fact is ICICI has been notorious for aggressive selling of its products, and by extrapolation, we can assume, would have taken some risks in their overseas investments too. Are the chickens coming home to roost? On a networth of around 10Bill USD, it has a foreign book of 5 Bill USD (total asset book is much bigger though)

The lines outside the ATM banks and the steady fall in the stock price is indeed unnerving. I do hope these are technical falls and not really based on fundamentals. Banks at end of the day are as strong as the confidence its stakeholders have in it, the fear mongering of a bank collapse can be a self-fulfilling prophecy. No bank, however strong, can survive the demands on cash made by its depositors. No bank maintains high levels of liquidity, and with global credit markets tightening (India is showing signs of it too, call rates went up 20%+ last week prompting a CRR cut by RBI) it only adds to the woes.

I do wish SEBI does a probe of the activity in ICICI bank and publishes its findings soon.

The shareholding of ICICI bank makes interesting reading. Majority of its ownership resides with foreign entities!


Deutsche Bank Trust 28%
FIIs, NRIs, Foreign Banks, Companies and Nationals, OCBs 41%
Insurance Companies 10.75%
Bodies Corporate 5.88%
Mutual Funds 5.66%
Individuals 7.22%

For the well-being of the country's financial health (and mine too, I have been accumulating ICICI bank for a while now), I do hope it turns out fine. In worst case scenario, I dont think government would allow the bank to fail, it might be forced to merge with some other Indian bank (HDFC ?). So the depositors have no need to worry. However, if this were to happen, most likely the shareholders would be wiped out.

Fingers crossed! I continue accumulating the stock...