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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RATING RELATED FEATURES
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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