The Hindu Business Line : Banks see more growth in global operations

Mumbai, May 7 Despite the uncertainty in the global financial markets, Indian banks had a good run in their international operations, in the last fiscal, thanks to the increased overseas M&A activities of Indian corporates.

Among the banks that have declared their annual results for 2007-08, Bank of India, State Bank of India, Indian Overseas Bank and ICICI Bank have reported an increase in revenue from their international operations.

This growth is despite the fact that some of them have exposure to credit derivative transactions and had to make provisions for the marked-to-market losses as well.

Bank of Baroda, another large bank with significant overseas operations, is yet to announce its results.

The country’s largest bank, State Bank of India, for instance, saw its profits from overseas operations almost double from $90 million in 2006-07 to about $180 million in 2007-08, said a senior official of the bank. International advances were up by 50.4 per cent, year-on-year.

SBI made a provision of $10 million (approximately Rs 40 crore) on its marked-to-market losses on account of exposure to sub-prime paper in its overseas operations, last fiscal.

ICICI show

In the case of the largest private sector bank, ICICI Bank, international operations account for about 25 per cent of its consolidated banking assets, as on March 31, 2008. The bank made a provision of $170 million in the last fiscal on for the marked-to-market losses on its overseas credit derivatives exposure. The entire credit derivatives portfolio of ICICI Bank is $1.6 billion.

Retail deposits of ICICI Bank UK and Canada increased 90 per cent from Rs 15,740 crore as on March 31, 2007 to Rs 29,861 crore, as on March 31, 2008.

Overseas advances grew by 95.6 per cent from Rs 24,410 crore to Rs 47,746 crore and account for about 21 per cent of total advances.

The profit after tax of ICICI Bank UK was Rs 155 crore.

According to Mr Vaihbhav Agarwal, banking analyst with Angel Broking, banks such as SBI and ICICI are now looking at higher growth in international operations.

“This is more because of what the sector offers in terms of opportunity. Overseas mergers and acquisitions by Indian companies have been increasing. So banks like SBI and ICICI are well placed to meet this demand,” he said.

Near-term risk

But the banks may see some near-term risk because of the ongoing developments in the global markets, he added.

Bank of India also saw its foreign business increase to Rs 48,000 crore from Rs 42,118 crore. Foreign advances grew by 34 per cent. Foreign business now accounts for 17.5 per cent of net profit for the bank, said Mr T.S. Narayanasami, Chairman and Managing Director, Bank of India. The bank has made a provision of $5 million in the fourth quarter for its exposure to overseas credit derivatives instruments.