The return of capital will provide ICICI Bank the opportunity to optimise capital deployment and improve its return on equity.
ICICI Bank, India’s largest private sector bank, has extra capital in its overseas subsidiaries, which it plans to draw back to India.
The exact quantum will be determined later, in consultation with regulators abroad.
Speaking to Business Line, Chanda Kochhar, the bank’s Managing Director and Chief Executive Officer, said: “The bank has about $250 million excess capital in subsidiaries in the UK and Canada.”
Last year, in March, ICICI Bank’s UK subsidiary had repatriated $100 million of equity capital to its parent, while the Canadian subsidiary sent back 75 million Canadian dollars (about Rs 400 crore) in May 2013.
The UK and Canadian subsidiaries’ capital adequacy ratios were 26.1 per cent and 31.2 per cent, respectively, as on September 30, 2013.
According to Kochhar, given the way international economies and regulations are moving, the rate of growth in foreign businesses has been consciously calibrated by the bank and there is going to be excess capital. “So, yes, there is scope to bring back more capital. But it is not a very automatic or an easy step to take as we have to go through the regulators and get approval,” she said.
With operations in 18 countries, the overseas business constitutes about 25 per cent of the total business of ICICI Bank. International business accounted for 27 per cent of the bank’s total loan book of Rs 3,17,800 crore as of September 2013.
The return of capital will provide ICICI Bank with the opportunity to optimise capital deployment and improve its return on equity, which is currently about 15 per cent.
ICICI Bank’s capital adequacy ratio is currently 14 per cent, Kochhar said.
Asked about plans for any further infusion of funds, Kochhar said there was no immediate need.
“We have investments in our non-banking subsidiaries which don’t need more capital and are generating profits. We have the ability to monetise some of those investments,” Kochhar added.