The Hindu Business Line : Indian banks’ Lehman exposure negligible

Mumbai, Sept. 16 While the collapse of the US-based investment bank Lehman Brothers may not have a direct impact on Indian banks, some of them may face marginal losses due to their exposures to the US bank.

The biggest private bank in the country, ICICI Bank, has the largest exposure. It has invested €57 million, (approximately $80 million) in senior bonds of Lehman Brothers. The investment is through the UK subsidiary, ICICI Bank UK PLC, and the bank has already made a provision of about $12 million against investments in these bonds, said Ms Chanda Kochhar, the bank’s Joint Managing Director and Chief Financial Officer.

The investment in Lehman Brothers bonds constitutes less than 1 per cent of the bank’s UK subsidiary’s assets and less than 0.1 per cent of ICICI group’s total assets, she said in a statement issued on Tuesday.

“Considering a 50 per cent recovery estimate, the additional provision required would be about $28 million. There is no other material impact on ICICI Bank or ICICI Bank UK PLC on account of exposure to Lehman Brothers,” she said.

Some Indian banks which have overseas operations have an exposure to Lehman Brothers, but as the amounts involved are negligible, the impact is likely to be minimal, banking analysts said.

Among the public sector banks, State Bank of India has an exposure of $ 5 million to Lehman through one of its foreign offices, said a senior official from the bank.

Bank of India has an exposure of about $10 million to FRNs (Floating Rate Notes) of Lehman Holdings, (which has gone bankrupt) and about $20 million thorugh CLN (Credit Linked Notes) to a Lehman subsidiary which has not been affected, said Mr T S Narayanasami, Chairman and Managing Director, BoI.

“There will be a hit, but we will know only as time evolves. We will have to make some provision,” he said.

Bank of Baroda has an exposure of $10 million (approximately Rs 47 crore) to CLNs (Credit Linked Notes) issued by Lehman Brothers, said a senior official of the bank.

Axis Bank has an exposure of about $1 -$ 1.5 million to Lehman Brothers, through a marked-to-market forex counter-party deal, which is maturing sometime in 2009-2010, said a senior official from the bank. “The exposure of Axis Bank, Bank of Baroda and Bank of India is immaterial. The only bank to be the most impacted would be ICICI Bank, but they too have exited a large part of their portfolio consisting of international clients and are now concentrating on the domestic portfolios”, said a banking analyst with a brokerage.