Surprise Loan Loss at ICICI

123jump.com Staff
04 Mar, 2008
New York City

Stocks in Mumbai trading fell on the worries related to 60,000 crore rupees of farmer loans write-off and new worries related to surprise loan loss from ICICI Bank. The reported a surpise write-off of $264 million related to credit derivatives linked to the U.S. risky loans. The bank is likely to take as much as $70 million of charge in the current quarter.

[R]10:00AM New York, 7:30PM Mumbai - Sensex fell for the third day in a row on a surprise subprime loan loss from ICICI Bank.[/R]

Market Sentiment

Indian market fell for the third successive trade on Tuesday as investors continue to react to the Union Budget released on Friday and a surprise subprime loan loss from ICICI Bank.

The 30-share BSE Sensex lost 2% or 337.99 at 16,339.89. On the National Stock Exchange, the 50-company S&P Nifty index fell 1.8% or 88.75 at 4864.25.

Banks and real estate companies were battered after ICICI Bank reported a surprise write-down of $264 million loss. The loss, though small, took market by surprise and averages fell 3.5% by mid-day. Banks are also concerned that their profit margins would be hit after the government decided to write-off loans worth 60,000 crore rupees to 4 crore small farmers.

Before federal budget presentation, Indian markets declined on global cues after U.S. stocks fell at the end of last week on poor earnings and weak economic data.

Of the Sensex index 30 shares, 19 stocks gained while the rest declined.

Reliance Industries, ACC, DLF, Reliance Communication, Cipla, ITC and Larsen & Toubro were among stocks in the benchmark index that closed lower.

However, Hindalco Industries, Maruti Suzuki and Mahindra & Mahindra were among the index stocks that gained.

Of the stocks traded on BSE, 497 stocks advanced, 2,198 stocks declined, and 42 stocks remained unchanged.

Turnover

Daily turnover on the BSE stood at 5,804 crore rupees while turnover on the National Stock Exchange was at 14,486 crore rupees.

Essar Oil was the most active stock on the BSE. The stock had the highest turnover of 314.90 crore rupees. Reliance Industries, Reliance Natural Resources, ICICI Bank and Reliance Petroleum were also among the most active stocks.

Economic News

India''s structured finance wherein banks and entities arrange funds by partly selling their loan books has grown by over 100% in 2007 reaching $14.5 billion.

According to a joint report by Moody''s Investors and Service and ICRA, the global rating agency''s Indian affiliate, it said the structured finance grew from $6.7 billion last year despite the fallout of the recent US sub-prime crisis.

The report said the segment was likely to witness another growth this year.

The report said vigorous growth in 2007 was dominated by a number of small deals, with each averaging $37 million. The figure is below the $41 million of 2006.

Further, the report said expansion was largely driven by collateralized loan obligations and asset-backed securities, while there were no public cross-border deals in 2007.

Gainers and Decliners

ICICI Bank fell 5.2% to 971.60 rupee. India''s largest bank declined on reports that the bank lost $264 million on account of the US subprime crisis.

However, according to media reports, the bank may have to provide for another $50 million of investment losses in the current quarter in addition to $70 million write-off taken in the third quarter of fiscal 2008.

Hindalco Industries gained 5.3% at 199.90 rupees and Maruti Suzuki gained 3.6% at 905.70 rupees.

Mahindra & Mahindra rose 3.1% at 705.35 rupees and Housing Development Finance Corporation increased 2.5% at 2636.65 rupees.

Tata Motors gained 1.3% at 701.80 rupees.

ACC lost 5.1% at 746 rupees and DLF fell 5.1% at 678.15 rupees.

Cipla shed 4.6% at 201.90 rupees, ITC declined 4.2% at 184.85 rupees and Larsen & Toubro lost 3.6% at 3223.15 rupees.

Suzlon Energy declined 4.4% to 241 rupees after UBS Securities Asia cut its share price estimate on the Suzlon stock by 31% to 305 rupees and downgraded the rating to ''neutral'' from ''buy'', citing higher raw material costs, rising warranty provisions and overall lower volumes.

Parle Software jumped 4.5% to 536.10 rupees after the company said its board will meet next week to consider allotment of bonus shares in the ratio of three shares every one existing share.

Reliance Update

Reliance Industries lost 2.7% to 2241.50, rupees, Reliance Energy was up 1.3% at 1504.75 rupees and Reliance Communication lost 6% at 514.55 rupees