ICICI Bank and Axis Bank’s monetary positions on Wednesday received the thumbs-up from rating companies Moody’s and Fitch, respectively. Their ratings were retained, each day after the country’s largest bank, State Bank of Indian, was downgraded by Moody’s.
“Moody’s believes the probability associated with systemic support for ICICI Bank is high, given it's sizeable retail deposit franchise, as well as its importance towards the national payment system as the second-largest commercial bank, ” the actual agency said.
ICICI Bank, the country’s largest private field bank, got the rating because of a robust business and capitalisation. Fitch affirmed Axis Bank’s long-term foreign currency issuer default rating at ‘BBB-’ having a stable outlook. The rating reflects the bank’s strong franchise and it is sound profitability and asset quality. The reiteration of a financial strength rating of ‘C-’ for ICICI Bank came each day after Moody’s downgraded SBI from ‘C-’ to ‘D+’ due to the public sector lender’s deteriorating asset quality and increasing non-performing assets (NPAs).
A ‘D’ rating suggests “modest innate financial strength, potentially requiring some outside support at times”, whilst a ‘C’ rating denotes “adequate intrinsic financial strength”.
About the SBI downgrade, chairman Pratip Chaudhuri said the bank had already given an analysis from the downgrade action to the finance ministry. “The downgrade pertains to the perpetual debt, which was raised in 2007.
This particular, no longer, is considered in core capital under Basel-III norms. The bank is not likely to issue these instruments later on, ” he said. Chaudhuri said he was aware the stock price was in a two-year low, which was undesirable.
The ratings, which came within the last hour of trading on Wednesday, failed to enthuse a lacklustre stock exchange, as bank shares closed lower for the third program in row. BSE Bankex, the sectoral index tracking motion banking shares, fell 2. 5 per to close from 9, 961. 5. The index is down 8. 2 percent this month. SBI closed at Rs 1, 715. thirty, down four per cent from the previous close. ICICI Financial institution too declined to Rs 778. 95, down 2. 72 percent. Axis Bank closed lower by 0. 74 per penny to Rs 952. Industry lobby Ficci reacted to the actual SBI downgrade, saying the agency had raised legitimate concerns within the outlook for the Indian banking sector. “Given the scenario of alarmingly rising NPA levels, uncertainty over ability to raise capital and infusion of capital by the government when confronted with strained finances, the move could have far reaching implications for the banking sector in general. The mounting stress on NPAs gave reasons for a few to call SBI Stressed Bank of India, ” this said.
For the banking sector, though, things do not look very bright within the immediate future. Centrum Broking, in a preview of financial sector stocks, said the pressure on net interest margin (NIM) was likely to continue in Q2 FY12, led by upward re-pricing associated with term deposits, fuller impact of the savings rate backpack and lower deployment pace.
The asset quality trends during the quarter could be a mixed bag. Private banks are likely to maintain/improve slippages and public sector banks could see volatility in slippages as they complete the migration of NPL recognition towards the core banking system, according to Centrum. After consolidating its business for 2 years to overcome difficult economic conditions and rising delinquency within consumer loans, ICICI Bank posted moderate asset growth of 12 percent in 2010-11.
Source : Business-Standard