Minister's statement on ICICI Bank's $264-million sub prime loss sends markets into jitters

04 March 2008

Reacting to the news that ICICI Bank had lost $264 million till the end of January 2008 in the sub prime crisis due to its CDO holdings, Chanda Kochar, joint managing director, ICICI Bank, has clarified that the bank had not declared any fresh sub prime losses and that the bank had already factored in the mark to market loss.

She said ICICI might have to provide $50 million in the current quarter for sub prime losses in addition to the $70 million already provided in the last quarter.

Minister of state for finance Pawan Kumar Bansal had said in a written response to a question in Parliament this morning that following the sub prime crisis ICICI Bank's overseas operations had reported the marked-to-market loss.

The report of the statement led to widespread fears of fresh sub prime losses, pulling down ICICI Bank's shares, which had closed at 1024.45, opened at Rs1040, and fell by 8 per cent to Rs929.10 rupees on the BSE was trading at around Rs969.

However, Kochar said ICICI Bank has already accounted for the mark-to-market loss, Kochhar televised interview on CNBC-TV18. The bank set aside $70 million on account of this in the last quarter and estimates a provision of about $50 million in this quarter, she said.

She, however, clarified that the bank did not have a direct exposure to sub prime assets, but Indian assets that the bank was holding as investment structures rather than as loans.She explained that as investment structures, these had to be marked to market as the credit spread widened. Accordingly, there was no underlying credit loss.