ICICI Bank denies rumours

MUMBAI // ICICI Bank, India's second-largest lender, has denied rumours that its top executives have been selling their holdings because of its links to the now defunct Lehman Brothers. ICICI shares fell 5.3 per cent to 560.05 Indian rupees (Dh44.55), their lowest level since July 17, at the close of trading in Mumbai on Wednesday. The bank, which earlier dropped as much as 10.4 per cent, has declined 55 per cent this year.

"These rumours are baseless and irresponsible, and no shares have been sold by members of the top management of the bank during the current year," ICICI said in a statement. On Tuesday, the Mumbai-based bank reported that its UK banking subsidiary held ?57 million (Dh300m) of senior bonds issued by Lehman Brothers, which filed a petition for bankruptcy earlier this week. The securities accounted for less than one per cent of the unit's assets, said Chanda Kochhar, the joint managing director at ICICI. The UK division, which has already set aside US$12m (Dh44m) to cover losses on the Lehman investment, may increase provisions by $28m.

ICICI is India's most exposed bank to financial turmoil in the US. But with an overall balance sheet of about $100bn, analysts say ICICI's exposure to Lehman Brothers does not raise serious concerns. "There may be a second order or a third order impact down the line, but for now exposure is limited," said Shankar Narayanaswamy, a senior fixed-income credit analyst for Standard Chartered Bank in Mumbai. "ICICI has been borrowing to expand their international operations, so that will be impacted."

The rupee eased yesterday as the fall in Asian stocks raised concerns of more capital outflows, but suspected intervention by the central bank curbed a further drop. Asian stocks fell between three and four per cent, with emergency actions by central banks and governments around the world failing to ease a financial crisis that has sent investors fleeing to gold and government bonds. Earlier this week, India's Finance Ministry urged the Reserve Bank of India (RBI) to re-examine norms governing derivatives exposure of banks in order to shield the country's banking sector from ongoing financial fallout from the US. Mr Narayanaswamy said no market was immune to the current crisis.

"In India, the equity markets have been sustained by capital flows from international investors," he said. "Apart from the issue that valuations are getting questioned, there is an equity issue because of foreigners pulling out money from emerging markets in India and elsewhere, so it is not wise to believe we are immune." Shares in ICICI Bank yesterday rose 2.78 per cent to 575.85 rupees. * with Bloomberg

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