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Rating upgrades of public sector banks and their subsidiaries

Standard & Poor's Ratings Services on 28th October 2004, affirmed its counterparty credit ratings on the State Bank of India (SBI; foreign currency BB/Positive/B, local currency BB+/Stable/B) and ICICI Bank Ltd. (foreign currency BB/Positive/B). At the same time, Standard & Poor's affirmed its 'BBpi' public information rating on Bank of Baroda.

"Although the affirmations reflect the better financial profiles of SBI and ICICI Bank, the ratings on the two banks remain constrained by Standard & Poor's sovereign ratings on India (foreign currency BB/Positive/B, local currency BB+/Stable/B)," said Standard & Poor's . The affirmation of the ratings on SBI takes into consideration the continued improvement in the bank's loan quality, satisfactory profitability, and capitalization. The bank is the largest bank in India in terms of assets, loans, and deposits. SBI continues to have a close link with the sovereign, given that the Reserve Bank of India (RBI; the country's central bank) owns 59.8% of SBI, most of its operations are domiciled locally, and government securities make up 40% of its balance sheet.

The reduction in SBI's absolute nonperforming assets (NPA) and NPA ratio was due to higher recoveries, increased NPA write-offs, and NPA sale to Asset Reconstruction India Ltd. (Arcil). The reduction in its NPAs is more notable in light of more stringent 90-day overdue recognition norms now applicable.

SBI's net interest income to average adjusted assets (NII margin) improved slightly to 3% in fiscal 2004, from 2.9% in fiscal 2003, and this compares satisfactorily with the industry. In the near term, SBI's NII margins are expected to remain stable. Although SBI's operating profitability is expected to experience pressure from lower treasury profits and realized losses on its bond portfolio, this is expected to be mitigated by a reduced portfolio duration, growth in net interest income, and the bank's Investment Fluctuation Reserves.

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CRISIL upgrades ratings of public sector banks (Sept 2004)...Click Here

Outlook on India Rating Revised to Positive From Stable (Aug 2004) ...Click Here

Detailed comments of Moody's upgrade of India's long term foreign currency rating (February 2004) ...Click Here

Detailed comments of Standard & Poor's Upgrade of India's Outlook (December 2003)...Click Here

Detailed comments of Standard & Poor's Ratings of major Indian financial institutions/commercial Banks (October 2003) ...Click Here

Continuing uptrend in the Indian corporate sector-April-September 2004...Click Here

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