The Hindu Business Line : Banks see more credit growth overseas

Mumbai, Feb.4 Banks are seeing more growth in credit from their foreign operations thanks to the increased mergers and acquisitions by Indian corporates. This trend is likely to continue as corporates continue to raise money abroad and expand overseas, both organically and inorganically, say bankers.

Going by profit figures of banks for the quarter ended December 31, 2007, most of them with large overseas operations have reported more growth in overseas credit than domestic credit.

The country’s largest bank, State Bank of India, reported a growth of 51 per cent in credit from overseas operations as against 26-per cent growth in total advances, as on December 31. Net profit from the foreign offices was at $115 million, an increase of 45 per cent over last year. The bank’s foreign offices handled 31 mergers and acquisitions deals aggregating $19.82 billion in the period January-December 2007, against 13 deals $5.38 billion in the previous year.

ICICI Bank saw the proportion of advances of its international branches increase to 21 per cent, from 12 per cent last year and the year-on-year growth in overseas advances has been 100 per cent. The outstanding advances from international branches are Rs 45,000 crore as on December 31, 2007.

Ms Chanda Kochhar, Joint Managing Director, ICICI Bank, said, “The growth is mainly because of Indian corporates who are expanding abroad and because of more mergers and acquisitions.”

“One reason for the higher growth in international operations is the lower base. But it will continue to increase because of more number of syndicate loans and foreign acquisitions by foreign companies,” said the general manager in charge of international operations at Bank of Baroda.

BoB, which has operations across 23 countries, reported 35 per cent growth in credit from international operations at Rs 20,903 crore (Rs 15,514 crore), for the nine months ended December 31, 2007. As compared to this, total advances grew 23 per cent.

Bank of India also saw 30 per cent growth in advances from international operations at Rs 52,000 crore (approximately Rs 40,000 crore).

“We have been seeing this rate of growth for some quarters now. Even though ECBs have slowed down, after the Reserve Bank of India imposed restrictions, overseas advances are growing due to corporate M&As. But going ahead we have to be careful about the asset quality in our international operations,” said a senior official from BoI .

Punjab National Bank, a new entrant in international operations, has seen its balance sheet grow to $100 million in the last eight months, said Mr Ranjan Dhawan, General Manager, PNB.

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