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Rating upgrades of public sector banks and their subsidiaries


The affirmation of the rating on ICICI Bank, the second-largest bank in India by assets, reflects its satisfactory financial profile, which is underpinned by recovering underlying profitability, better loan quality and diversification, together with its strong competitive position in the large and still growing potential of the consumer finance market. The strong recovery in ICICI Bank's NII margins is mainly driven by a greater proportion of deposits in its funding base, lower overall cost of deposits, as well as the repayments of ICICI Ltd.'s high cost borrowings. Nevertheless, the bank's NII margins are still below the industry average due to these high cost liabilities.

ICICI Bank's improved loan quality is due to better recoveries, bad debt write-offs, transfer of NPAs to Arcil, as well as its restructuring and rehabilitation initiatives. Strong growth in retail exposures, which accounted for 32% of loans in March 2004, has improved the diversification of its loan portfolio. Nevertheless, this means its exposures to new retail financing, in particular housing loans, may not be seasoned fully, and could experience some impairment of quality. All ratings on senior unsecured debt of ICICI Bank are affirmed, while the ratings on future subordinated notes under its US$1 billion MTN program were revised to 'BB-' from 'B+', in line with the bank's improved stand-alone financial profile.

The affirmation of the public information rating on Bank of Baroda (BoB) reflects the bank's improved interest margins in fiscal 2004, as a result of its active management of its cost of deposits. Although this supported its NII margins, the bank's enhanced underlying profitability was largely attributed to strong non-recurring trading gains posted during fiscal 2004 (23% of operating revenue). BoB has improved its loan quality, lowering its absolute NPAs by 5% in fiscal 2004, as well as its gross NPA ratio. This was due mainly to improved recoveries, upgrading its sub-standard assets, and write-offs during the year.

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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

Moody's Ratings of Indian Banks and Financial Institutions (February 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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