Lehman's fall to cost ICICI Bank approximately $80 million

17 September 2008

With Lehman Brothers filing for bankruptcy in the US, the country's largest private bank ICICI Bank is expected to lose approximately $80 million (Rs375 crore), invested in Lehman's bonds through the bank's UK subsidiary. As part of its treasury operations the bank had undertaken transactions with Lehman Brothers entities as counter-parties.

ICICI Bank said in a statement that its $80 million  invested in the Lehman bonds constituted less than 1 per cent of the UK subsidiary's total assets of about $8.7 billion at that date and less than 0.1 per cent of the ICICI Group's consolidated total assets  of $112.6 billion (Rs4.8 lakh crore).

According to ICICI Bank's joint managing director Chanda Kochhar, ICICI Bank UK PLC already holds a provision of about $12 million against investment in these bonds. Considering a 50-per cent recovery estimate, the additional provision required would be about $28 million. "There is no other material impact on ICICI Bank or ICICI Bank UK PLC on account of exposure to Lehman Brothers," she said in the statement.

ICICI Bank trimmed its credit default swap (CDS) exposures of $650 million in overseas corporates to $80 million, during this quarter. The bank is also likely to be marginally affected on its investments of $1.5 billion  CDS of Indian papers.

Further the bank will also have to consider making additional provisioning on its investments in corporate bonds and on CDS exposures of Indian corporates, which may not be of a substantial nature.

ICICI Bank, India's second largest bank after SBI, is among those with a large exposure in the international market, which makes it sensitive to any turmoil in the global financial markets.