ICICI Bank has said it will prefer organic growth over expansion through overseas acquisitions, as many hidden liabilities could come in along with cheap valuations of the troubled foreign banks.
The bank would rather conserve capital for organic growth in India and abroad, its CEO and Managing Director Chanda Kochhar told media.
"There are two reasons for it... first, they may appear cheap in terms of value, but actually there could be other challenges involved with the acquisition in terms of actual credit quality, the asset liabilities structure and so on," Kochhar said when asked whether ICICI Bank would look at acquiring foreign banks.
"Second, I would want to conserve capital for the growth that we would see in India and organic growth that we can achieve," she added.
Asked whether it was now in league of Japanese banks in terms of their capabilities of acquiring troubled European and American banks, Kochhar said: "Even if I get into the league, I would not want to acquire."
With the valuations of financial institutions in the US and Europe falling like nine-pins in the ongoing economic crisis, Japanese banks such as Mitsubishi UFJ and Nomura have been acquiring assets of various troubled financial institutions in the West for their expansion.
However, the country's top private sector bank has decided to take the organic route for its growth.
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It has presence in 18 countries with subsidiaries in the UK, Russia and Canada. Besides, it is present in the US, Hong Kong, Singapore, Bahrain, Sri Lanka, Qatar and Dubai.
Explaining her growth strategy for the coming years as ICICI Bank's newly appointed chief, Kochhar said: "The growth has many dimensions. This year, I would look at growing our low-cost deposits, growing our recurring sources of revenue streams like transaction banking incomes, growing capability of employees to handle more diverse functions and growing our net interest margin and profitability level."
"These are the growth areas that I am going to look for this year in our organisation," said Kochhar, who assumed charge of ICICI Bank's MD & CEO this month from K V Kamath.
"It's not always necessary to grow the balance sheet. The dimensions of this year's growth are going to be low-cost deposits, net interest margins and profitability," she added.
The bank's profit fell by 10 per cent in 2008-09, marking its first annual profit decline since incorporation in 1994.
The profit had grown by about 34 per cent in 2007-08, while its growth has averaged at 15 per cent in five years.
"We are talking about improving net interest margin, controlling costs, controlling credit quality. So I am hopeful and I am confident that it would be better than the last year," she said.