US banking turmoil hits the prices of ADRs for domestic banks, shows data

The US banking turmoil has impacted the prices of American Depository Receipts (ADRs) for domestic banks.

In the case of HDFC Bank, the ADR premium has shrunk by nearly 5 percentage points, from 16.5 per cent during the start of the month to less than 12 per cent, at present.

Meanwhile, the discount in case of Axis Bank, State Bank of India (SBI) and ICICI Bank has widened. For instance, ICICI Bank ADRs were available about a per cent cheaper compared to its domestically listed shares. Now the discount has widened to more than 2 per cent.

In other words, the sell-off — triggered by the collapse of Silicon Valley Bank (SVB) — has been more severe in the US than in India. Over the past one week, most banking stocks, globally, have seen selling pressure on fears of contagion and risks for mark-to-market losses to their bond portfolios amid rising rates in the US.

Analysts say domestic banks’ dependence on local depositors insulates them from the crisis. Interestingly, in the global banks’ market capitalisation ranking, the position of domestic banks has climbed.

For instance, SBI is now the 26th most valuable lender globally, up from 30th during the start of the month. The ranking for HDFC Bank, India’s most valuable bank, however, has remained unchanged at 13.