ICICI Bank’s UK Subsidiary Repatriates Rs 550 crore

The second largest private sector bank by Market Capitalization ICICI Bank, yesterday, made an announcement on the exchange that it has repatriated funds from its UK subsidiary. The bank redeemed USD 50 million of preference shares and returned worth USD 50 million of equity capital after receiving requisite of approvals. On an aggregate basis, this resulted in a repatriation of USD 100 million (Rs 550 crore) from the ICICI bank UK PLC, which is its wholly owned banking subsidiary in the United Kingdom.

Well the move came in after there were questions raised earlier as to why the UK subsidiary is sitting on the hefty capital and if the same is not required should be bought back to its parent company. For ones reference, as on December 31 2012, ICICI bank’s UK PLC’s Capital Adequacy Ratio (CAR) stood at 31.5%. Post the repatriation, the capital base would be adequate for the UK subsidiary said the press release. Further, we believe that a capital of Rs 550 crore in the domestic business would not really improve the CAR for ICICI bank's domestic bank.

According to media reports, the bank has majorly three overseas subsidiaries which are located in United Kingdom, Canada and Russia. And in other international markets it operates through branches.

As of December 2012, ICICI bank’s UK subsidiary’s total assets stand at USD 4 billion (Rs 22,000 crore). Of the total assets around 66% are in terms of loans and advances of the bank. The bank witnessed a substantial decline in its profits after tax in the December 2012 quarter. The Net profit of the company decreased by 30% to Rs 29.7 crore on a YoY basis. Looking at the decline in profits and the fact that the European economy is slowing down, we believe that the move of bringing back the surplus capital in the domestic business was good. 

We, at Dalal Street Investment Journal (DSIJ), continue to remain bullish on the bank and continue to believe that one should remain invested in the counter keeping in mind a long-term horizon to garner better returns. Improving asset quality and Net Interest Margin (NIM) coupled with decent business growth are the major positive factors for the bank.