ICICI Bank Gains 11% in Last Six Trading Sessions

ICICI Bank shares have outperformed the S&P BSE Sensex in the last six trading sessions. The company’s shares have surged 11 percent during the period whereas the Sensex could gain only two percent in the same period. As a result, the shares of the company have hit the biggest level after March 21. The bank’s stock came under a cloud of selling after controversy erupted on the CEO, Chanda Kochhar, and her family members’ alleged involvement in providing a loan to Videocon Group.

Second Top Gainer

On Tuesday, ICICI Bank gained 3.01 percent at the close and became the second-biggest gainer in the banking sector. Axis Bank was the top gainer with an addition of 5.43 percent on Tuesday. Significantly, these two banks CEO were facing one or the other issues thus limiting the gains of these two stocks in the bourses. The overall S&P BSE Bankex could edge up only 0.93 percent at the BSE. Punjab National Bank (PNB), which was also involved in a scam, underperformed the banking index gaining only 0.10 percent.

The other private sector banks like HDFC Bank, IndusInd Bank, Federal Bank and Kotak Mahindra Bank have not gained anything and were the losers in the segment. While Federal Bank lost 1.72 percent, HDFC Bank shed one percent. IndusInd Bank lost 0.81 percent, and Kotak Mahindra Bank dipped 0.40 percent.

ICICI Bank shares have reached a recent high of $306 on March 14 and dropped about 14 percent until April 2 when the stock hit a low of Rs.262, Business Standard reported. The reason behind this was the controversy surrounding the alleged conflict of interest that involved Kochhar and her family members. During the same period, the benchmark index fell 1.7 percent due to the year-end profit booking.

Reacting to the recent controversy, Fitch, a global rating agency, indicated that any potential losses due to the loan were given to Videocon Group would not have any significant impact on the bank’s financial profile. The rating agency thinks that its core capitalization would continue to remain strong irrespective of the loans being written off or not. ICICI Bank was assigned a rating based on its strong capitalization and profitability. At the end of December, its core capitalization was 14.2 percent, which was among the biggest in the sector.

Merrill Lynch Buys

However, the rating agency cautioned that the possible conflict of interest would only create risks to its reputation apart from corporate governance issues. Fitch also issued a warning that it would not mind cutting the rating of the bank in case the risk perceptions to reputation and financial profile increase significantly. The bank is under the scanner of CBI, enforcement directorate and income tax department for extending a loan to Videocon Group for alleged favoritism.

More than any other reasons, the bank’s stock surged after Merrill Lynch acquired close to 30 million shares for Rs.8.234 billion from an open market deal. The data available with BSE indicated that the American firm’s Singapore unit purchased 29.42 million shares. This represented 0.46 percent interest in the bank. ICICI Bank shares were purchased at an average cost of Rs.280.

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