ICICI Bank:Introspect to avoid collapse

Dear ICICI Bank, 

1. This is an open letter for ICICI bank policy makers and decision making body as courtesy robustness of Indian financial system that ICICI bank has not collapsed or gone bankrupt; however its heat is being felt by other banks also. I was aghast to learn through one of my overseas readers that he has seen a number of his friends querying for the safety of their wealth with other overseas banks also to include Punjab National Bank, SBI, Bank of Baroda and Axis bank etc.

2. Please take the time for introspection as this is second time with in a span of 7 years that long lines have been seen outside your ATMs.

3. Please take the action at international front as there exist fear that the bank may face mark-to-market losses given its exposure to overseas financial institutions. Please give them the correct figures without hiding anything under veil or taking help of accounting procedures to regain lost confidence.

4. Take action to address the domestic front too where concerns have been seen about ICICI bank high exposure to residential mortgages and credit card receivables, as these segments are likely to see higher defaults.

5. Even this time ICICI bank will see a small rise in personal loans and credit card receivables as defaults will be higher and thus your revenues will be impacted.

6. Even your treasury losses caused due to forex derivative transactions of the last fiscal have not been accounted and as a net result your margins will be continuously under pressure.

7. Moreover your reliance as on as on June 30, 2008 on home loan (65,600 crore), Credit cards (Rs 8,500 crore) and personal loans (Rs 12,000 crore) needs reconsideration.

8. ICICI bank officials have to take note of the fact that even Merrill Lynch has predicted a modest growth of 13 per cent due to weaker loan growth and bank is likely to bear loss of $30 million on its CDS book (as part of the Indian balance sheet) and higher non-performing loans provisions.

9. At the home front Motilal Oswal has reported that ICICI Bank will see a marginal increase of 1% growth in earnings in the second quarter as compared to the sector earnings growth of 15%.

10. Well this open letter is written for ICICI bank considering its recent collapse or bankruptcy rumors but the points are equally applicable to the banking sector as all assets of banking sector needs scrutiny in view of economic slowdown and interest rates firming up.