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Global agency Fitch today cut credit rating outlook to negative from stable of 11 financial entities including SBI, ICICI Bank, PNB and Axis Bank.
The action follows the revision earlier this week of India's outlook to negative.
"The outlook revision of the financial institutions reflects their close linkages with the sovereign by virtue of their high exposure to domestic counterparties and holdings of domestic sovereign debt," Fitch said in a statement.
The list of downgraded entities include six government banks (including an international banking subsidiary of a government bank), two private banks. These include Bank of Baroda, Bank of Baroda (New Zealand) Ltd (BOBNZ), Canara Bank, and IDBI Bank.
Besides two wholly owned government institutions – Export-Import Bank of India and Housing and Urban Development Corporation Ltd have also been similarly downgraded. Besides, the outlook of IDFC Ltd and Indian Railway Finance Corporation Ltd outlook has also become negative.
However, Fitch said the banks continue to have reasonable customer deposit base, domestic franchises and adequate capital.
The non-banking financial entities, meanwhile, lack the funding advantage, which puts them more at risk during times of increased market volatility, it said.
Fitch also said sovereign support for both the large banks and 'policy-type institutions' is expected to remain strong, with the former benefiting from their large share of system assets and deposits and the latter from their association with the government.
According to analysts, the cut in the rating outlook may raise the cost of overseas borrowings for such institutions.
Earlier this week, Fitch lowered India's credit rating outlook to negative, citing corruption, inadequate reforms, high inflation and slow growth.
India faces an "awkward combination" of slow growth and elevated inflation, Fitch had said, adding that the country "also faces structural challenges surrounding its investment climate in the form of corruption and inadequate economic reforms".
Standard and Poor's (S&P) had in April lowered India's rating outlook to negative from stable. It also warned on June 11 that the country may be the first in the BRIC grouping to falter and its sovereign credit rating may slip below investment grade.
The action follows the revision earlier this week of India's outlook to negative.
"The outlook revision of the financial institutions reflects their close linkages with the sovereign by virtue of their high exposure to domestic counterparties and holdings of domestic sovereign debt," Fitch said in a statement.
The list of downgraded entities include six government banks (including an international banking subsidiary of a government bank), two private banks. These include Bank of Baroda, Bank of Baroda (New Zealand) Ltd (BOBNZ), Canara Bank, and IDBI Bank.
Besides two wholly owned government institutions – Export-Import Bank of India and Housing and Urban Development Corporation Ltd have also been similarly downgraded. Besides, the outlook of IDFC Ltd and Indian Railway Finance Corporation Ltd outlook has also become negative.
However, Fitch said the banks continue to have reasonable customer deposit base, domestic franchises and adequate capital.
The non-banking financial entities, meanwhile, lack the funding advantage, which puts them more at risk during times of increased market volatility, it said.
Fitch also said sovereign support for both the large banks and 'policy-type institutions' is expected to remain strong, with the former benefiting from their large share of system assets and deposits and the latter from their association with the government.
According to analysts, the cut in the rating outlook may raise the cost of overseas borrowings for such institutions.
Earlier this week, Fitch lowered India's credit rating outlook to negative, citing corruption, inadequate reforms, high inflation and slow growth.
India faces an "awkward combination" of slow growth and elevated inflation, Fitch had said, adding that the country "also faces structural challenges surrounding its investment climate in the form of corruption and inadequate economic reforms".
Standard and Poor's (S&P) had in April lowered India's rating outlook to negative from stable. It also warned on June 11 that the country may be the first in the BRIC grouping to falter and its sovereign credit rating may slip below investment grade.
Fitch revises outlook on Indian FIs to negative
Fitch Ratings has revised the Outlook on the 'BBB-' Long-Term (LT) Foreign Currency (FC) Issuer Default Rating (IDR) of India-based financial institutions to Negative from Stable, while affirming the rating.
These include six government banks (including an international banking subsidiary of a government bank), two private banks, two wholly owned government institutions and one infrastructure finance company.
A list of affected entities is as follows:- State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BOB), Bank of Baroda (New Zealand) Limited (BOBNZ), Canara Bank (Canara), IDBI Bank Ltd. (IDBI), ICICI Bank Ltd, Axis Bank, Export-Import Bank of India (EXIM), Housing and Urban Development Corporation Ltd. (HUDCO), Infrastructure Development Finance Company Ltd. (IDFC).
The rating action follows Fitch's revision of the outlook on India's LT Foreign- and Local-Currency IDRs to Negative from Stable (please see rating action commentary dated 18 June 2012 at www.fitchratings.com). The Outlook revision of the financial institutions reflects their close linkages with the sovereign by virtue of their high exposure to domestic counterparties and holdings of domestic sovereign debt.
Should the Sovereign Long-Term IDR be downgraded, the banks with Viability Ratings (VR) of 'bbb-' would also be affected given the previously mentioned linkages. Separately, Fitch is also of the opinion that pressures are building generally on the stand-alone credit profile of these institutions which will negatively impact VRs, given India's weakening economic and fiscal outlook, slowing business reforms and inflationary pressures that in turn could put further pressure on their future asset quality. VRs of banks with concentrated exposures to problematic sectors could be impacted more.
Fitch derives some comfort from the banks' reasonable customer deposit base, established domestic franchises and adequate capitalisation. The non-banks, however, lack the funding advantage, which puts them more at risk during times of increased market volatility. In the agency's opinion, sovereign support for both the large banks and policy-type institutions is expected to remain strong, with the former benefiting from their large share of system assets and deposits and the latter from their association with the government. Consequently, Fitch expects the LT IDRs for the above two categories to be aligned to the sovereign's rating and also provide a Support Rating Floor close to, or at, the sovereign rating.
A list of outstanding ratings (including the above) is provided below:
- SBI: - LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3' - Viability Rating: 'bbb-' - Support Rating: '2' - Support Rating Floor: 'BBB-' - USD5bn MTN programme: 'BBB-' - USD400m perpetual tier 1 bonds: 'B' - National Long-Term rating: 'Fitch AAA(ind)'; Outlook Stable PNB: - LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3' - Viability Rating: 'bbb-' - Support Rating: '2' - Support Rating Floor: 'BBB-' - National Long-Term rating: 'Fitch AAA(ind)'; Outlook Stable - National Short-Term rating: 'Fitch A1+(ind)' - INR10bn lower tier 2 subordinated bonds: 'Fitch AAA(ind)' - INR150bn certificates of deposits programme: 'Fitch A1+(ind)' BOB: - LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3' - Viability Rating: 'bbb-' - Support Rating: '2' - Support Rating Floor: 'BBB-' - USD500m senior notes under MTN programme: 'BBB-' - USD350m senior notes under MTN programme: 'BBB-' - USD300m upper Tier 2 notes under MTN programme: 'B+' - National Long-Term rating: 'Fitch AAA(ind)'; Outlook Stable - National Short-Term rating: 'Fitch A1+(ind)' - INR25bn lower Tier 2 debt programme: 'Fitch AAA(ind)' - Deposit programme rating: 'Fitch tAAA(ind)' - Short-term debt: 'Fitch A1+(ind)' BOBNZ: - LT FC IDR: 'BBB-'; Outlook Negative
-Support Rating: '2' Canara: - LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3' - Viability Rating: 'bbb-' - Support Rating: '2' - Support Rating Floor: 'BBB-' - USD1bn MTN programme: 'BBB-' - FC senior debt under MTN programme: 'BBB-' - USD350m of senior notes under MTN programme: 'BBB-' - USD250m upper Tier 2 notes under MTN programme: 'B+' - National Long-Term rating: 'Fitch AAA(ind)'; Outlook Stable IDBI: - LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3' - Viability Rating: 'bb' - Support Rating: '2' - Support Rating Floor: 'BBB-' - National Long-Term rating: 'Fitch AA+(ind)'; Outlook Stable - National Short-Term rating: 'Fitch A1+(ind)' - National Long-Term deposit rating: 'Fitch tAAA(ind)' - INR159.15bn senior debt: 'Fitch AA+(ind)' - INR49.08bn lower tier 2 notes: 'Fitch AA+(ind)' - INR25bn senior and lower tier 2 bonds: 'Fitch AA+(ind)' - INR3.5bn upper tier 2 subordinated bond programme: 'Fitch AA-(ind)' - INR160bn certificates of deposit programme: 'Fitch A1+(ind)' ICICI: - LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3'
- Viability Rating: 'bbb-' - Support Rating: '2' - Support Rating Floor: 'BBB-' - USD4.46bn senior notes: 'BBB-' - SGD200m senior notes: 'BBB-' - USD750m Upper Tier 2 bonds: 'B+' Axis: - LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3' - Viability Rating: 'bbb-' - Support Rating: '3' - Support Rating Floor: 'BB+' - FC senior debt: 'BBB-' - National Long-Term rating: 'Fitch AAA(ind)'; Outlook Stable - INR57bn subordinated lower tier 2 debt programme: 'Fitch AAA(ind)' - INR6.53bn subordinated upper tier 2 debt programme: 'Fitch AA+(ind)' - INR2.14bn perpetual tier 1 debt programme: 'Fitch AA+(ind)' EXIM: - LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3' - Support Rating: '2' - Support Rating Floor: 'BBB-' - JPY24bn senior unsecured notes: 'BBB-' - National Long-Term rating: 'Fitch AAA(ind)'; Outlook Stable - Domestic deposit programme: 'Fitch AAA(ind)' - INR47bn bank loans: 'Fitch AAA(ind)' HUDCO:
- LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3' - Support Rating: '2' - Support Rating Floor: 'BBB-' - National Long-Term rating: 'Fitch AA+(ind)'; Outlook Stable - National Short-Term rating: 'Fitch A1+(ind)' - INR60bn domestic bonds (partly taxable and partly tax-free): 'Fitch AA+(ind)' - INR80bn bank loans: 'Fitch AA+(ind)' - INR90bn domestic bonds: 'Fitch AA+(ind)' - INR15bn short-term debt: 'Fitch A1+(ind)' - INR23.5bn domestic bonds issued under a letter of comfort (dated 8 February 2003) from the government: 'Fitch AAA(ind)(SO)' - Domestic term deposit: ' Fitch tAA+(ind)' IDFC: - LT FC IDR: 'BBB-'; Outlook Negative - National Long-Term rating: 'Fitch AAA(ind)'; Outlook Stable - INR90bn non-convertible debentures: 'Fitch AAA(ind)' - INR15bn zero-coupon bonds: 'Fitch AAA(ind)' - INR29.3bn long-term infrastructure bonds: 'Fitch AAA(ind)' - INR470bn long-term debt programme: 'Fitch AAA(ind)'
Source: Financial Express
These include six government banks (including an international banking subsidiary of a government bank), two private banks, two wholly owned government institutions and one infrastructure finance company.
A list of affected entities is as follows:- State Bank of India (SBI), Punjab National Bank (PNB), Bank of Baroda (BOB), Bank of Baroda (New Zealand) Limited (BOBNZ), Canara Bank (Canara), IDBI Bank Ltd. (IDBI), ICICI Bank Ltd, Axis Bank, Export-Import Bank of India (EXIM), Housing and Urban Development Corporation Ltd. (HUDCO), Infrastructure Development Finance Company Ltd. (IDFC).
The rating action follows Fitch's revision of the outlook on India's LT Foreign- and Local-Currency IDRs to Negative from Stable (please see rating action commentary dated 18 June 2012 at www.fitchratings.com). The Outlook revision of the financial institutions reflects their close linkages with the sovereign by virtue of their high exposure to domestic counterparties and holdings of domestic sovereign debt.
Should the Sovereign Long-Term IDR be downgraded, the banks with Viability Ratings (VR) of 'bbb-' would also be affected given the previously mentioned linkages. Separately, Fitch is also of the opinion that pressures are building generally on the stand-alone credit profile of these institutions which will negatively impact VRs, given India's weakening economic and fiscal outlook, slowing business reforms and inflationary pressures that in turn could put further pressure on their future asset quality. VRs of banks with concentrated exposures to problematic sectors could be impacted more.
Fitch derives some comfort from the banks' reasonable customer deposit base, established domestic franchises and adequate capitalisation. The non-banks, however, lack the funding advantage, which puts them more at risk during times of increased market volatility. In the agency's opinion, sovereign support for both the large banks and policy-type institutions is expected to remain strong, with the former benefiting from their large share of system assets and deposits and the latter from their association with the government. Consequently, Fitch expects the LT IDRs for the above two categories to be aligned to the sovereign's rating and also provide a Support Rating Floor close to, or at, the sovereign rating.
A list of outstanding ratings (including the above) is provided below:
- SBI: - LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3' - Viability Rating: 'bbb-' - Support Rating: '2' - Support Rating Floor: 'BBB-' - USD5bn MTN programme: 'BBB-' - USD400m perpetual tier 1 bonds: 'B' - National Long-Term rating: 'Fitch AAA(ind)'; Outlook Stable PNB: - LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3' - Viability Rating: 'bbb-' - Support Rating: '2' - Support Rating Floor: 'BBB-' - National Long-Term rating: 'Fitch AAA(ind)'; Outlook Stable - National Short-Term rating: 'Fitch A1+(ind)' - INR10bn lower tier 2 subordinated bonds: 'Fitch AAA(ind)' - INR150bn certificates of deposits programme: 'Fitch A1+(ind)' BOB: - LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3' - Viability Rating: 'bbb-' - Support Rating: '2' - Support Rating Floor: 'BBB-' - USD500m senior notes under MTN programme: 'BBB-' - USD350m senior notes under MTN programme: 'BBB-' - USD300m upper Tier 2 notes under MTN programme: 'B+' - National Long-Term rating: 'Fitch AAA(ind)'; Outlook Stable - National Short-Term rating: 'Fitch A1+(ind)' - INR25bn lower Tier 2 debt programme: 'Fitch AAA(ind)' - Deposit programme rating: 'Fitch tAAA(ind)' - Short-term debt: 'Fitch A1+(ind)' BOBNZ: - LT FC IDR: 'BBB-'; Outlook Negative
-Support Rating: '2' Canara: - LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3' - Viability Rating: 'bbb-' - Support Rating: '2' - Support Rating Floor: 'BBB-' - USD1bn MTN programme: 'BBB-' - FC senior debt under MTN programme: 'BBB-' - USD350m of senior notes under MTN programme: 'BBB-' - USD250m upper Tier 2 notes under MTN programme: 'B+' - National Long-Term rating: 'Fitch AAA(ind)'; Outlook Stable IDBI: - LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3' - Viability Rating: 'bb' - Support Rating: '2' - Support Rating Floor: 'BBB-' - National Long-Term rating: 'Fitch AA+(ind)'; Outlook Stable - National Short-Term rating: 'Fitch A1+(ind)' - National Long-Term deposit rating: 'Fitch tAAA(ind)' - INR159.15bn senior debt: 'Fitch AA+(ind)' - INR49.08bn lower tier 2 notes: 'Fitch AA+(ind)' - INR25bn senior and lower tier 2 bonds: 'Fitch AA+(ind)' - INR3.5bn upper tier 2 subordinated bond programme: 'Fitch AA-(ind)' - INR160bn certificates of deposit programme: 'Fitch A1+(ind)' ICICI: - LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3'
- Viability Rating: 'bbb-' - Support Rating: '2' - Support Rating Floor: 'BBB-' - USD4.46bn senior notes: 'BBB-' - SGD200m senior notes: 'BBB-' - USD750m Upper Tier 2 bonds: 'B+' Axis: - LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3' - Viability Rating: 'bbb-' - Support Rating: '3' - Support Rating Floor: 'BB+' - FC senior debt: 'BBB-' - National Long-Term rating: 'Fitch AAA(ind)'; Outlook Stable - INR57bn subordinated lower tier 2 debt programme: 'Fitch AAA(ind)' - INR6.53bn subordinated upper tier 2 debt programme: 'Fitch AA+(ind)' - INR2.14bn perpetual tier 1 debt programme: 'Fitch AA+(ind)' EXIM: - LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3' - Support Rating: '2' - Support Rating Floor: 'BBB-' - JPY24bn senior unsecured notes: 'BBB-' - National Long-Term rating: 'Fitch AAA(ind)'; Outlook Stable - Domestic deposit programme: 'Fitch AAA(ind)' - INR47bn bank loans: 'Fitch AAA(ind)' HUDCO:
- LT FC IDR: 'BBB-'; Outlook Negative - Short-Term FC IDR: 'F3' - Support Rating: '2' - Support Rating Floor: 'BBB-' - National Long-Term rating: 'Fitch AA+(ind)'; Outlook Stable - National Short-Term rating: 'Fitch A1+(ind)' - INR60bn domestic bonds (partly taxable and partly tax-free): 'Fitch AA+(ind)' - INR80bn bank loans: 'Fitch AA+(ind)' - INR90bn domestic bonds: 'Fitch AA+(ind)' - INR15bn short-term debt: 'Fitch A1+(ind)' - INR23.5bn domestic bonds issued under a letter of comfort (dated 8 February 2003) from the government: 'Fitch AAA(ind)(SO)' - Domestic term deposit: ' Fitch tAA+(ind)' IDFC: - LT FC IDR: 'BBB-'; Outlook Negative - National Long-Term rating: 'Fitch AAA(ind)'; Outlook Stable - INR90bn non-convertible debentures: 'Fitch AAA(ind)' - INR15bn zero-coupon bonds: 'Fitch AAA(ind)' - INR29.3bn long-term infrastructure bonds: 'Fitch AAA(ind)' - INR470bn long-term debt programme: 'Fitch AAA(ind)'
Source: Financial Express
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