ICICI Bank to repatriate capital from Canada arm

ICICIBank, the largest private sector bank in the country, plans to repatriate apart of the capital of its Canadian arm, as business growth has been crippledby stringent regulation. The lender’s Canadian banking subsidiary,sitting on a capital adequacy ratio of 29.3 per cent, is witnessing a declinein its return on equity. The bank has already initiated talks with the Canadianregulator on the issue.  Theprivate sector lender has decided to send home a part of the capital of ICICIBank Canada as the subsidiary is finding it difficult to grow its loan portfolioafter the regulation that it must lend money within the country if it raiseddeposits locally.

Given the company’s international strategy, which is primarilyIndia-linked, ICICI is not growing its balance sheet in Canada and will seek torationalise the capital invested in the Canadian subsidiary over time, with therequisite regulatory approvals. ICICI Bank currently has three overseas bankingsubsidiaries in Canada, the UK and Russia. According to the bank's annualreport for 2010-11, the Canadian arm's paid-up share capital was Rs 4,175 croreas of March-end, including a paid-up preference share capital of Rs 415 crore.The total assets of the bank were 5.10 billion Canadian dollars as of September-endand were at the same level three months back. The subsidiary's profit after taxwas 5.2 million Canadian dollars, according to International FinancialReporting Standards, in the second quarter.

ICICI Bank is facing a similar issue in the UK, where theregulator has asked banks to deploy deposits raised locally within that market.However, the bank had not initiated any discussion with the regulator on therepatriation of capital of ICICI Bank UK. The capital base of the bank in theUK is relatively small. But, in Canada, the bank has a large surplus of capital.In the UK, the bank's subsidiary had paid-up share capital of Rs 2,654 crore ason March 31, including paid-up preference share capital of Rs 223 crore. The UKarm's capital adequacy ratio was 29.8 per cent as of September-end. ICICI BankUK reported a net profit of $2.2 million in July-September. Total assetsdeclined to $5.13 billion as of September-end from $5.96 billion as on June 30.The bank's Russian arm, ICICI Bank Eurasia, had paid-up capital of Rs 318 croreat the end of March.