Wednesday, August 22, 2012

Betting big on the inorganic mode

First it was the Bank of Madura. Then, it was Bank of Sangli. And now, the Bank of Rajasthan. ICICI Bank is seemingly strengthening its presence in the Indian banking space by undertaking a slew of acquisitions much like its peer HDFC Bank did in the past. by Avneesh Singh

It was the February of 2008. The world was yet to come face-to-face with the debacle of the US banking giant Bear Stearns. Yet in India, officials of the largest private sector bank, ICICI Bank, had started feeling the heat. And it was not for the fact that they had already predicted the slowdown that was coming their way, it was due to the acquisition of the Centurion Bank of Punjab (CBoP) that proved the genesis of all headaches in the ICICI camp. CBoP had been on the radar of ICICI Bank for quite sometime already, but it was HDFC Bank that finally got hold of CBoP. ICICI Bank, which had held on to its numero uno position in the private banking space and second slot in the banking space apparently felt that it was losing its ground. It made ICICI realise that something’s got to give, if it wanted to avoid nightmares of the likes of HDFC Bank, Axis Bank and Punjab National Bank beating it with the lesson cane! It decided that growing inorganic was the route to redemption.

What followed was interesting. Despite the Bear Stearns episode in March 2008, the Indian banking scenario continued sauntering without many hiccups. There were promises in the air, especially the air above the Indian banks. But something set the cat amongst the pigeons – the crash of the banking behemoth Lehman Brothers, which filed for bankruptcy in September 2008. The world economy was heading for its worst crisis since the Great Dipression and Indian banks set off the alarm. One which set off the louded was ICICI Bank. Reason – during that point in time, it had an exposure of around 57 million euros in Lehman senior bonds and another $30 million in the insurance company American International Group (AIG), whose financial health too was as shaky as Lehman Brothers’. ICICI Bank was forced to pack its dreams (of steaming past others of its ilk in the Indian space) in a suitcase and catch the next flight to the land of protectionism. Times were too risky to take a plunge and ICICI Bank wanted to play safe.

More than a 21 months later, after a prolonged phase of silence, the bank has stepped back into its aggressive boots. And this time around, it has given clear indications of a desire to grow through both organic and inorganic means. Even Chanda Kochhar (CEO of ICICI Bank) has done much work towards rebuilding the perception of the bank amongst its customers. May 3, 2010, also saw ICICI open its 2000th branch in the country (it opened it in Andheri West, Mumbai). But there was more in store for the market. Withing 20 days, the Board of Directors of the bank approved an amalgamation of Bank of Rajasthan (BoR) with ICICI Bank, subject to approval by shareholders and Reserve Bank of India, therefore sending that signal of aggression to competitors and customers alike.


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