Mumbai: The fall of Lehman Brothers Holdings Inc. on 15 September 2008 triggered panic among customers of India’s second largest bank by assets, ICICI Bank Ltd, who rushed to withdraw their cash, fearing its imminent collapse. That fear, it’s clear a year on, was highly exaggerated. ICICI Bank, which had a minuscule exposure to Lehman, appears to be safe and sound.
Learning curve: ICICI Bank’s MD and CEO Chanda Kochhar says the Lehman collapse has taught her to be nimble-footed and feels it is important to reorient strategy to the prevailing economic environment. Abhijit Bhatlekar / Mint
In an interview, the bank’s managing director and chief executive officer, Chanda Kochhar, recalls those challenging days and tells the story of a dramatic turnaround of investor sentiment. The bank’s shares, which dropped to Rs262.95 apiece in March, have risen around 220.33% since then to close at Rs842.30 on Tuesday, outstripping both the bellwether Sensex and the Bankex, which comprises lenders. The Sensex has risen 101.64% and the Bankex by 152.64% in the period. Edited excerpts:
Among Indian banks, ICICI Bank was the most affected by Lehman’s collapse. What was your exposure to Lehman?
Our exposure to Lehman was less than $80 million (around Rs390 crore), very small in comparison with (the) total size of our balance sheet, our networth and profits. There was nothing that should have caused anybody any concern. But I guess that the concerns that arose that time were more of perception and (it was) fear of the unknown that got people worried. That’s where the whole problem started.
Have you written off the exposure?
(The) recovery process would take long...proceedings are going on. Gradually bondholders would get some money. We have written it off. It’s been one year now and we have healthy profits and capital. It has made no dent in our books whatsoever.
When did you sense this was coming?
We sensed there was a problem right from January 2008. I remember we were at the World Economic Forum and there were initial signals from the mood of the bankers that things were not okay. The US banking system was having some problems.
If you remember, around February-March 2008, we were pretty vocal in saying that the environment was getting risky and we started slowing our growth rates in all products.
We were ahead of time and people had not envisaged what is happening to the global financial world. They thought we were saying something because there was a problem with us.
Were you ever scared that the bank might collapse?