Global financial crisis compounded with record oil prices, leading to low growth across global economies, high inflation levels, increasing unemployment, and funds pulling out of equity markets. All these macro factors working on Indian economy as well, tempering growth and earnings expectations for the next 12-18 months across industries, including banking. IBN bounces along a trough at $25-30 levels.
Jan'08 - ICICI Bank caught in the downdraft of the global banking crisis that originated in the US home lending sector. IBN's own core banking business has little direct exposure to the affected segments, and only small indirect exposure. But likely that IBN's increasing international business, and its presence in global fund portfolios, led to IBN being viewed similar to other global banks. Most such banks saw large price declines ranging 40-70% and even more, as a result of over $300-400 billion losses on direct and indirect portfolio exposure to US mortgage-backed securities. IBN booked a loss of $265 million on its own exposure.
Indian economy had record high GDP growth rates averaging around 9% during this period. This led to a huge consumer markets expansion, and demand for consumer finance (personal transport, homes, credit cards, consumer durables). ICICI positioned itself very aggressively in this segment, built large nationwide direct branch & indirect sales distribution network, and became market share leader. It peaked its Retail lending portfolio at around 60% of total portfolio. It also ventured into newly opened up, high growth insurance segments and executed well to build market leading positions (life & general insurance). The company also has a long history, and significant market share in corporate segments.
