Share prices of India’s largest private bank, ICICI Bank, tanked nearly 10 percent on Indian equities markets Friday on sustained bear hammering based on unconfirmed rumours of it being hit by the global financial turmoil before recovering somewhat by close. ‘The rumours are baseless because ICICI Bank has enough depth and solvency to withstand even a complete write-off of all its doubtful exposure either in India or abroad,’ said Jagannadham Thunuguntla, head of the capital market arm of India’s fourth largest share brokerage firm, the Delhi-based SMC Group.

1. ICICI Bank shares tank on rumours
Oct 3rd, 2008 | By Sindh Today | Category: India
New Delhi, Oct 3 (IANS) Share prices of India’s largest private bank, ICICI Bank, tanked nearly
10 percent on Indian equities markets Friday on sustained bear hammering based on
unconfirmed rumours of it being hit by the global financial turmoil before recovering somewhat
by close.
The share price of the bank which closed at Rs.504.50 Wednesday fell to an intra-day low of
Rs.498, a drop of Rs.46.95 or 8.51 percent, before recovering somewhat to finish at Rs.508.35,
down Rs.43.10 or 7.82 percent from its previous close.
At close its share prices were still above the 52-week low of Rs.458 last week, which had
prompted bank chairman M.V. Kamath to call for an investigation of its share price movement
by the market regulator Securities and Exchange Board of India (SEBI).
The continuous selling pressure that the bank is facing is despite Kamath declaring a few days
back that the bank was safe, and which India’s central regulator, the Reserve Bank of India, has
also endorsed.
There have been rumours floating for some time that the bank will be hit by the global financial
meltdown.
‘The rumours are baseless because ICICI Bank has enough depth and solvency to withstand even
a complete write-off of all its doubtful exposure either in India or abroad,’ said Jagannadham
Thunuguntla, head of the capital market arm of India’s fourth largest share brokerage firm, the
Delhi-based SMC Group.
‘ICICI Bank’s actual exposure to Lehman Bros net of provisioning is a meagre $28 million or
about Rs.112 crore (Rs.1.12 billion),’ Thunuguntla told IANS.
‘It has no exposure to Washington Mutual which is the only other financial institution that has
been liquidated and so its exposure to other troubled institutions is not really in danger of being
wiped out,’ he said.
‘The bank’s net worth is $11.7 billion, so the threatened amount is only about 0.03 percent and
that is negligible,’ the analyst said.

2. ‘The bank’s total foreign loans and advances is, however, as is to be expected, largest among
Indian banks at about Rs.541 billion or about $13.5 billion. So, unless its entire foreign portfolio
or a substantial part of it is wiped out, ICICI Bank should have no problems at all,’
Thunuguntla said.
‘The only problem can be if there is a run on the bank, but then that would be a problem for any
bank,’ he said.
‘Beyond a point, banks are all about confidence and if depositors lose faith and begin to queue
up at the bank’s counters to withdraw their deposits, any bank would be in trouble as nobody
keeps more than 5 percent of its deposits in liquid cash,’ he said.
‘Thus, the rumours about ICICI Bank’s vulnerability are nothing but rumours and have no basis
in fact,’ he said.
Following Friday’s sustained bear hammering, it now remains to be seen what action the market
regulator will take.