Major Indian banks like ICICI Bank and Punjab National Bank have taken a hit due to the Lehman Brothers imbroglio. However, setting aside speculations about the extent of mark-to-market losses and exposure to the bankrupt Lehman Brothers, ICICI Bank and PNB clarified their position on Tuesday.

ICICI Bank stated that it expects to recover $40 million over a period of time. It also stated that it has around $80 million worth investment in senior bonds of Lehman Brothers Inc.

Also clearing its position on its association with Lehman Brothers, India?s second largest state-owned lender, Punjab National Bank (PNB) confirmed its exposure worth $4-5 million (Rs 16-20 crore) to the bankrupt Wall Street giant.

Speaking on this matter, ICICI Bank joint managing director and CFO Chanda Kochchar stated, ?Considering a 50% recovery estimate from our total investment in Lehman Brothers bonds, the additional provision required would be about $28 million.?

?There is no other material impact on ICICI Bank or ICICI Bank UK PLC on account of this exposure that presently constitutes less than 1% and 0.1% exposures of ICICI Bank UK PLC and ICICI Bank respectively,? she said.

As on June 30, 2008, ICICI Bank and its subsidiaries had consolidated total assets of Rs 484,643 crore and ICICI Bank UK PLC had assets worth $8.7 billion. The bank?s UK subsidiary, ICICI Bank PLC already holds a provision of $12 million against investment in Lehman?s bonds.

PNB chairman and managing director K C Chakrabarty also clarified, ?Our exposure to Lehman is a combination of debts and derivatives. The bank currently holds a provision of Rs 2-4 crore against this exposure. We look forward to analyse the rescue package expected to be offered to Lehman Brothers.? Earlier on Tuesday, ICICI stock opened at Rs 570, around 9% lower than the previous day?s close on the BSE.

A report by Edelweiss Securities said, ?The credit spreads for international banks have increased sharply over the last two months, which is likely to result in MTM losses for ICICI Bank. As per our calculations, MTM losses on the bank?s UK book could be to the tune of $200 million.?

It further added, ?Considering a duration of 3.5 years and spread movement of 100 basis points, MTM losses could be around 3.5% of the investment book (equivalent to $175 million). MTM losses on exposure in Lehman Brothers (Lehman), of $80 million, could be $25-40 million since around 30-50% of the exposure is likely to be under default.?

The report also mentioned that this this MTM loss may not impact the banks? reported profit significantly as it would be in the subsidiary account.

However, ICICI Bank shares were pounded down to Rs 565. As more clarity on the extent of losses emerged from the management, share prices recovered to close the day at Rs 591.35, recording an overall loss of 5.82%. It was the biggest loser amongst the Sensex stocks on Tuesday.

At the same time, Tuesday saw huge gains made by other big banking players. SBI ended on the top of the gainers heap, gaining 6.49% over its previous close. HDFC Bank gained by 2.16%.