Saturday, December 06, 2008

Farewell Mr.Kamath and Welcome Ms.Kochhar

ICICI Bank finally nails down its succession plan. Outgoing CEO K.V.Kamath (who will now be its non-executive Chairman) is to be replaced by Ms.Chanda Kochhar, currently Joint MD & CFO.

Kamath has been instrumental in turning ICICI, the erstwhile public sector project finance outfit into a private sector full service commercial bank and then in hoisting it as India’s second largest bank (balance sheet size) until recently, when the impact of the bank’s overseas bond portfolio facing massive erosion triggered a run on the bank. Depositors panicked and pulled out deposits that almost eroded the bank’s substantial deposit base. Among Indian banks, ICICI Bank had one of the largest exposures to overseas assets. According to statements tabled in Parliament, ICICI Bank suffered mark-to-market losses of $264 million in the credit derivatives segment. The bank had about $2.2 billion worth of exposure to credit derivatives while the largest bank in the country, State Bank of India (SBI), has an exposure of about $1.1 billion. Though the bank has not directly invested in the US market, it has taken a beating due to the depreciation in value of securities witnessed in the global markets.

In comes Ms.Kochhar at a time when a collapse of the US sub-prime mortgage market and the reversal of the housing boom in other industrialized economies is having a ripple effect around the world. She is going to have a tough time ahead because she has to lift a troubled bank out of a mess created not just by itself, but the global financial world.

But if she is lucky enough to have the bailout and economic stimulus tailwind propelled by central banks and governments around the world, she has the caliber to see the bank through its crisis.

Let’s welcome her to the hotseat. And farewell Mr.Kamath !

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