ICICI Bank to funnel overseas capital to boost domestic focus

Mumbai: ICICI Bank Ltd will continue to bring back capital from its overseas subsidiaries as its international business stagnates, a top executive has said.

According to N.S. Kannan, an executive director at India’s second largest private sector lender, business at its wholly-owned subsidiaries has not been growing because Indian companies are not enthusiastically going abroad and seeking to acquire capacities. This means they don’t require much funding from the bank’s international offices.

ICICI Bank, at present, has only two foreign bank subsidiaries in Canada and the UK. Apart from these, it has branch offices in Singapore, Hong Kong and Bahrain.

“A place like Canada, for example, where we have large capital, the growth in India-based lending and consequently the balance sheet have not grown much. As a result, our strategy has also been changing, and we are trying to get some of our capital back,” Kannan said.

The private sector lender has been consistently repatriating its capital from ICICI Bank Canada since fiscal 2014.

In the last three financial years, it has brought back 242 million Canadian dollars, or Rs1,229 crore.

To be sure, the Canadian unit has excess capital too. At the end of June, its tier-1 capital adequacy ratio was 22.5%.

“Canada, the bank would definitely like to get much more capital back. Will we be looking at exit today, no. But we will have to see how it goes,” Kannan said. However, any future capital repatriation would depend on approvals from the Canadian regulator, he added. “We have to talk to the regulator and they have to be comfortable and only when we get formal approvals, can we actually repatriate capital.”

At the end of the last fiscal, the total assets of ICICI Bank Canada was Rs3,779 crore, about 4% of the parent’s size, according to ICICI Bank’s annual report. Its asset size and profit fell 2.35% and 38.35% respectively in fiscal 2016.

“Exiting Canada subsidiary is important for ICICI Bank. Management had indicated that the bank will not require capital till FY18. Repatriating the capital from this subsidiary will support domestic business,” said Ashutosh Mishra, senior analyst, Reliance Securities Ltd.

Indeed, the bank’s domestic business, especially retail, has been growing by about 17-18% every year, even as the international business stagnated. This has meant that the share of retail loans has increased to more than 46% of total loans at the end of June—an 8 percentage point growth from four years ago. Repatriating capital would help in funding the retail growth domestically.

In December 2014, the bank had sold its shareholding in its Russian subsidiary, ICICI Bank Eurasia Llc to Sovcombank ICB JSC for an undisclosed sum. The Russian unit accounted for less than 0.1% of ICICI Bank’s consolidated total assets at the end of September 2014, the bank said.