ICICI Bank could record a rise in its non-performing assets with troubled Singapore-based oil trading major Hin Leong Trading which is filing for bankruptcy, The Economic Times reported.
According to the oil trading company's filing, ICICI Bank has an exposure worth $100 million, out of its total dues of $3.64 billion to lenders. Out of its total exposure to Hin Leong Trading, $75 million is secured over inventory.
"We confirm that the bank, in the normal course of its business, has exposure to the borrower group in question, is taking due steps to protect its interests, and will appropriately reflect the same in its financial statements, as it would do in respect of all its banking exposures," the bank confirmed.
The major lenders to the company include HSBC, ABN AMRO Bank N.V. and DBS Bank, with an exposure of $598 million, $299 million and $288 million respectively.
ICICI Bank's net non-performing assets (NPA) stood at ₹10,388.50 crore and the gross NPA was ₹43,453.86 crore as of the quarter ending December 2019.
The slump of the oil trading company comes at a time when oil prices have plunged to a multi-year low due to the steep fall in demand and increasing supplies amid the COVID-19 crisis.
This creates a problem for the bank even if it is willing to recover 75% of its dues that is secured over oil inventory.
The WTI prices have fallen over 37% in one day to $11 a barrel and Brent fairs a little better at around $26 a barrel. In such a situation, it would be dangerous to incur any huge inventory losses for the stock holder.
The founder and director of the company had ordered the firm not to reveal losses of $800 million over years. The founder had admitted to this in a court filing.
Following the reports of non-disclosure of losses, shares of ICICI Bank plummeted. On the BSE, the bank's shares closed at ₹361.50 per share, down by ₹14.45 or 3.84% from its earlier close.