Even as the corporate and financial sectors talk of a slowdown and its possible impact on profitability, the country?s largest private sector lender, the Rs 4-lakh crore ICICI Bank, is betting big on overseas M&A and project finance as key growth drivers for FY09.

This contrasts with the view of several analysts who forecast a slowdown in M&A activity and expressed fears of projects being hit. ICICI Bank, on the other hand, expects a 25% growth in overseas M&A and project finance, while retail lending?including home loans?slows in line with market trends to 5-10% in FY09.

Last Saturday, ICICI Bank unveiled its first quarter results, which showed a 6% decline in post-tax profits as the bank took a hit on account of the wild gyrations in rates and the consequent impact on its bond portfolio. The bank took a Rs 594-crore ($138-million) knock on its trading portfolio, its SLR securities portfolio and treasury income in the first quarter.

ICICI Bank joint managing director & CFO Chanda Kochhar told FE that overseas M&A and project finance would be ?key growth drivers? for the bank, and that it saw sufficient growth from corporate and international finance. Last fiscal, of the $40 billion in overseas M&A activity generated by India, ICICI Bank was associated in various forms with about two-thirds, Kochhar pointed out, adding that M&A and related funding would continue to be a big growth opportunity.

Indian companies, in the given global scenario, would probably strike ?better deals at better values?, with competition from PE players growing less intense as they grapple with the effects of a global credit crunch. ?After Indian companies close M&A deals, they also require funds to expand capacities and for working capital abroad. So, M&A and related activity will continue to be big for us, together with foreign currency funding for projects in India,? Kochhar said.

On project finance, ICICI Bank?s calculations are simple. While in the past three months there have admittedly been no new projects, there has also been no impact yet on the existing $700-billion investment pipeline that has already been built up. ?Even if you assume a 50:50 debt-equity ratio, these projects will need $350 billion in debt over the next three years. This translates into over $100 billion a year,? said Kochhar.

?The investment pipeline is still strong, but fresh investment is not taking place. But this is not a big cause of worry. $700 billion is a very large pipeline. If it stopped at $100-200 billion, we could have said we?re cutting back on future growth,? she said.

?This $700 billion is being funded and invested, and is not being withdrawn. If the $700 billion is implemented, we?re still home with a 7.5-8% growth rate for the next several years,? she added. However, Kochhar made it clear that since there?s little or no new investment, it was essential to ensure that the $700 billion is implemented.

Retail lending, ICICI Bank reckons, will grow at 5-10%, since with interest rates and real estate prices moving up with inflation, spending power at the retail level is dipping. ?People will put less money into interest payments, and even take fewer loans than earlier. That is bound to happen.? Home loans would also grow by a modest 5-10% for the bank, she said. Around 57% of ICICI Bank?s business comes from retail banking.

ICICI Bank?s estimate is that the wild swings in the money market witnessed in the first quarter may not recur, and that markets may see more orderly activity in the coming quarters. ?One-year government securities moved by 130 bps, overnight index swaps by around 230 bps, and equity markets dipped 24%. This kind of volatility across segments was unprecedented. Things should become more orderly from now? we hope!? she said.