ICICI Bank Ltd., India's second biggest lender, expects overseas business to contribute 30 percent to profit by 2008, twice as much as now, as it boosts credit to domestic companies seeking to expand abroad.
``We're probably looking at this business growing to 30 percent of profit'' by 2008, Chief Executive Officer K.V. Kamath said yesterday in an interview at the World Economic Forum in Davos, Switzerland. ``We think that this will get to be a substantial piece of our overall balance sheet.''
Rising prices of commodities, a stronger local currency and faster-than-expected economic growth have encouraged many Indian companies to buy assets abroad, opening up new avenues for ICICI, State Bank of India and other lenders. ICICI last year bought a bank in Moscow and opened a branch in Hong Kong to capture the business of Indian companies trading with China and Japan.
``There's a good potential for Indian banks to earn more from the offshore market as companies carry their relationship with banks'' when they expand overseas, said Rajat Jain, chief investment officer at Principal Asset Management, which has $1.6 billion in assets and 250,432 ICICI shares. ``Banks are going beyond just earning from overseas Indians.''
ICICI, which raised $1.75 billion in December, is looking to boost its share of the remittances market. An estimated 25 million Indians living in the U.S., the U.K., the Middle East and Southeast Asia sent $22 billion back home last year. A fifth of this money was sent through ICICI, Kamath said.
ICICI has units in Canada, the U.K. and Russia, and is also present in markets such as Bahrain, Dubai, Singapore and the U.S.
Indian companies and individuals are borrowing more, taking advantage of interest rates that are the lowest in three decades. An average 6.3 percent annual economic growth in the past decade, the fastest in more than 50 years, has encouraged spending. ICICI's shares are the fifth-biggest gainers on the benchmark Sensex over the past 12 months.
``I don't see a credit cycle which will turn worse,'' Kamath said today. ``When a country starts to emerge from poverty, growth sustains for 15 or 20 years. Maybe we are in the third, fourth year of that cycle, so we have a long way to go.''
The ratio of consumer lending to gross domestic product is about 10 percent in India, leaving room for future growth, ICICI forecasts. That compares with a ratio of 53 percent in Taiwan and 34 percent in Malaysia.
Almost two-thirds of ICICI's loans in the December quarter were given to individuals to purchase homes, cars and other durables, helping the lender post a 24 percent jump in profit.
The lender's shares rose 3.7 percent to 619.35 rupees on the Mumbai stock exchange on Friday.