Rating agencies focus on ICICI’s continuity plans

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MUMBAI: Rating agencies are trying to find out what continuity plans ICICI Bank has in place if the MD & CEO, Chanda Kochhar, were to step down. The concern is that the lender may not have contingency plans if the exit were to be abrupt.

“While recent events do not have any impact on the financials of the bank, we are keen on knowing what plans the bank has in place to ensure that operations remain unaffected in any eventuality,” said the head of financial institutions ratings at one of the rating agencies. According to the executive, with several agencies looking into conflict of interest issues, there is uncertainty over what the outcome of the investigation would be. This has happened even as the board issued a statement unequivocally supporting Kochhar.

In a statement, Crisil said that it will monitor developments pertaining to ongoing investigations into the bank’s exposure to Videocon Group to watch out for any “potential materiality in outcomes on areas like management stability or fund-raising ability and suitably factor them in its rating”. However, Crisil has said that it anticipates continuation in the lender’s strategy of building on its strong market position, while maintaining its healthy capitalisation levels and strong liability franchise, even as it strives to reduce bad loans.

Last week, rating agency Fitch had also said that the presence of the bank’s CEO in the credit committee (which sanctioned a loan to Videocon) and the bank’s reluctance to support an independent probe have raised doubts over the strength of its corporate governance practices.

S&P had said in a note to investors that the Central Bureau of Investigation is conducting a preliminary enquiry into whether the CEO’s husband, Deepak Kochhar, benefited from the lender’s decision to participate in the consortium loan. “The ICICI Bank board has offered full support to the leadership team. However, if allegations against the management prove to be true, they could hit the bank’s reputation and expose it to legal and financial risk,” the agency said.

There are instances in the past when rating agencies have reviewed their stance on a company following a change in CEO. In the case of Deutsche Bank, S&P last week placed the lender on credit watch with negative implications after the board brought in Christian Sewing to replace John Cryan. S&P said that the review followed an opinion that the management change would result in restructuring taking longer than current expectations.

News Source: https://timesofindia.indiatimes.com/business/india-business/rating-agencies-focus-on-icicis-continuity-plans-fear-abrupt-exit-by-ceo-may-hit-banks-ops/articleshow/63775866.cms

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