The outlook on India’s 10 financial institutions — six Government banks, two private banks and two wholly-owned Government institutions — has been upgraded to ‘Stable’ from ‘Negative’ by global credit rating agency Fitch.
The revision in the outlook was for State Bank of India, ICICI Bank, Axis Bank, Bank of Baroda, Bank of Baroda - New Zealand, Punjab National Bank, Canara Bank, IDBI Bank, Exim Bank of India and the Housing and Urban Development Corporation. The upgrade is in line with the sovereign rating change on June 12 and primarily driven by a strong propensity and ability of the Government to support financial institutions in the public sector if needed.
SBI, ICICI, PNB, BoB, Canara and IDBI are large domestic banks with a pan-India franchise and have a significant share of the system’s assets and deposits, the agency said in a statement.
The agency also affirmed their respective ratings including their BBB- Long-Term (Issuer Default Ratings or IDRs).
According to Fitch, ICICI’s and Axis’s ratings, which are at BBB-s, the same grade as India’s IDRs, also support the outlook revision, due to their steadily improving stand-alone credit profile despite difficult market conditions. While asset quality pressures cannot be ruled out, particularly from their infrastructure exposures, strong funding and profitability coupled with robust capital position provide adequate buffer against stress.Fitch expects non-performing assets (NPAs) and restructured assets of banks will continue to rise in the financial year ending March 2014.
“Government banks’ stressed assets were at 11.59 per cent as of end-2012 against the sector average of 9.61 per cent. Asset quality of certain Government banks, such as PNB, has witnessed a sharp deterioration which has put their viability under pressure. Further deterioration from current levels will add to the pressure, which may lead to a downgrade of their viability ratings,” it said.
beena.parmar@thehindu.co.in