ICICI Bank reduces its equity in overseas units

Equity investment in UK & Canada drops from 11.8% in FY10 to 4.8% in FY16

ICICI Bank, the country’s largest private sector lender, is looking at consolidating its position in the overseas market by shrinking its equity investment in its subsidiaries in the United Kingdom and Canada. The lender has significantly reduced its equity stake in both these subsidiaries from 11.8 per cent at the end of March 31, 2010, to 4.8 per cent at the end of FY16.

At the end of the quarter ended March, in rupee terms, the net advances of the overseas branches also decreased by 0.3 per cent, whereas in US dollar terms, the net advances decreased six per cent.

N S Kannan, executive director, ICICI Bank, in an analysts’ call, said the portfolio of overseas branches is expected to further decline in US dollar terms. The management said in line with its strategy of rationalising capital invested in overseas subsidiaries under its approach to capital allocation, during the January-March quarter  of 2016, the bank received capital repatriation of 87.1 million Canadian dollars (Rs 452 crore) from ICICI Bank Canada.

CAPITAL RATIONALISATION

• ICICI Bank Canada repatriated capital of Rs 452 crore  in Q4 of 2016
   
• UK subsidiary has repatriated total capital of $175 million (Rs 1,166 crore) since March 2013
  

 

Canada subsidiary has repatriated total capital of Rs  1,256 cr since March 2013
 

At the end of FY16, ICICI Bank’s equity investment in Canada and UK stands at Rs 2,531 crore and Rs 1,805 crore, respectively
 

In December 2014,  bank had sold off its shareholding in ICICI Bank Eurasia, the Russian subsidiary

In fact, both ICICI Bank UK and ICICI Bank Canada have repatriated total capital of $175 million (Rs 1,166 crore) and 242.1 million Canadian dollars (Rs 1,256 crore) respectively since March 2013. Despite this, both subsidiaries remain adequately capitalised with a capital adequacy ratio of 23.6 per cent at ICICI Bank Canada and 16.7 per cent at ICICI Bank UK respectively. At the end of FY16, ICICI Bank’s equity investment in Canada and UK stands at Rs 2,531 crore and Rs 1,805 crore, respectively.

The management had earlier stated that the bank expects growth in the domestic market to be higher than the international market they would look at calibrating growth and capital allocation in their overseas subsidiaries.

Net interest margin (NIM), a key indicator of a bank’s profitability, was a little subdued for international operations at 1.62 per cent in the fourth quarter of FY16, compared with 1.94 per cent in the preceding quarter.

“The Q4 number (NIM) was particularly impacted because of two reasons — one is the bond issue expenses; other is that in the short term, we have been staying liquid. So yes, of course, our endeavour would be definitely to improve the international margins, but overall we thought that we should focus a lot more on the asset quality improvement rather than getting too concerned about the margin at this stage,” Kannan said.

In line with shrinking its overseas business in December 2014, the lender had also sold off its shareholding in ICICI Bank Eurasia (its Russian subsidiary) to Sovcombank.