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Subprime Hits India

From Rediff:

State Bank of India, ICICI Bank , Bank of Baroda and Bank of India are set to book mark-to-market losses on the exposures of their foreign offices to credit derivatives, with the spreads on these widening since international lenders turned risk-averse following the crisis in the US subprime (or high-risk home loan) market.

Exposures of ICICI bank are about $1.5 billion, of which the article says mark-to-market losses are about 5-10%, meaning between 300 and 600 crore. That’s about 30-60% of their quarterly net profit. SBI has about $1 billion and the impact to them is about 10-25% of their quarterly net profit (1600 cr) .

Disclosure: Short ICICI.

  • yeehaa99 says:

    >sure indian real estate is in a bubble…There is no way people can afford houses in india. what goes up should come down

  • Anonymous says:

    >I may not be surprised that some Officials of Indian Banks will be probed by CBI if the losses come to open. Some may say US Wall Street firms bribed them to invest in CDOs etc.
    It will be interesting. All along I thought Indian banking was immune to Subprime.

  • kram says:

    >Deepak:
    Just read this post and am very surprised. Thought our banks were not ‘savvy’ enough to invest in CDOs. There are a few points to note here:

    1. Mark-to-market in the 75% range is fantasy. Real values may end up much lower than 50%. So the losses will be MUCH higher (thank stars that exposure is ONLY 1 – 1.5 billion).

    2. Anonymous, Corporates all over the world consumed CDOs and other subprime time-bombs. That was because of their AAA ratings and this is the crime committed by Moody’s, Fitch and S&P. There may be political ramifications and witch-hunt but no fault of the banks.

    3. Subprime is only 10% of the problem and it has now spread to near-prime, prime as well as Commercial Real Estate and slowly into all sectors of the US economy.
    Real reason is loose credit and low-interest rate policies which actually created the bubble.

    As yeehaa99 says, this problem also exists (under the surface) in India now. Housing is unaffordable for well over 99% of our population (even a software manager getting 1 lakh a month will eventually find it near-impossible to buy a house at 50-70 lakhs as he would eventually end up paying 1 – 1.5 crores for a house that is worth well below that).

    Coming crash in India will see home-buyer, builder and bank distress and prices in bubble areas can come as much as 50% lower or even lower (check out an earlier comment).

    Beware!!!

  • Anonymous says:

    >It is the beginning of the row, wait and watch to get the full picture. Banks should disclose at the earliest. No place for hypocracy