Current Affairs PDF

Moody maintains SBI & IDBI ratings unchanged

AffairsCloud YouTube Channel - Click Here

AffairsCloud APP Click Here

Moody’s Investors Service on Friday have told that the local and foreign currency deposit ratings of State Bank of India and IDBI Bank at ‘Baa3/P-3’

Baa-3: Baa’ (Global Long-Term Rating Scale) are judged to have medium-grade intrinsic, or standalone, financial strength, and thus subject to moderate credit risk

P-3 : P-3 (Global Short-Term Rating Scale) issuers (or supporting institutions) rated Prime-3 has an acceptable ability to repay short-term obligations

  • Modifier 3 specifies to generic rating classification and Baa represents lower rank

Flash points about SBI

  • SBI has struggled with poor asset quality since 2011, when GDP growth in India fell to under 9 per cent.Moody maintains SBI & IDBI ratings unchanged
  • In particular, high corporate leverage and stalled infrastructure projects led to rising levels of non-performing loans (NPLs) and restructured loans
  • The agency observed that the key remaining asset quality challenges for SBI is its exposure to highly-leveraged corporate groups that remain classified as standard assets
  • Following the review of RBI, SBI’s reported NPL ratio increased to 5.1 per cent at December-end 2015 from 4.25 per cent at March-end 2015
  • The credit cost will continue to remain high and pose a key drag on the bank’s profitability levels

Flash on IDBI

  • Moody’s expects the bank’s CET1 ratio to be maintained at a minimum 5 per cent
  • IDBI Bank’s asset quality is weak, with a gross NPL ratio of 8.9 per cent as at end-December 2015
  • The loan-loss coverage at 63 per cent and core equity tier 1(CET1) ratio at 84 per cent at end-December 2015
  • The bank’s loan book is not growing, and the year-on-year change in outstanding loans as of end-December 2015 is only 6 per cent

Points to note

  • SBI CEO- Arundhati Bhattacharya
  • IDBI CEO- Kishor Kharat