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Moody maintains SBI & IDBI ratings unchanged

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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