Moody’s on Friday affirmed long-term deposit rating of State Bank of India (SBI) and upgraded it for Punjab National Bank, Canara Bank and Bank of Baroda on improving credit profile.
The outlooks on long-term ratings of all the four banks remain stable, Moody’s Investors Service said in a statement. Moody’s has affirmed the Baa3 long-term local and foreign currency bank deposit ratings of SBI. SBI’s Baseline Credit Assessment (BCA) and additional tier 1 securities (AT1) program rating is upgraded to ba1 and (P)B1 from ba2 and (P)B2, respectively.
“The affirmation of SBI’s long-term deposit ratings at Baa3 and upgrade of BoB’s, Canara’s and PNB’s long-term deposit ratings to Baa3 from Ba1 reflect an improvement in India’s Macro Profile to Moderate+ from Moderate, the improving credit metrics of the four banks and Moody’s continued assumption of a very high level of government support to the banks in times of need,” Moody’s said in a statement. The bank deposit rating by Moody’s indicates bank’s ability to repay punctually its foreign and domestic currency deposit obligations.
Shares of SBI were trading at Rs 595.40 apiece, up 0.93 per cent on BSE. Canara Bank stock was trading 1.3 per cent up at Rs 324.40. Bank of Baroda was trading 1.8 per cent higher at Rs 181 and PNB was up 1.2 per cent at Rs 57.90 on BSE. Moody’s said the credit conditions in India have gradually improved, retail loans have performed well and the financial health of corporates too has improved following a decade of deleveraging. Still, loans to small and medium-size enterprises continue to pose risks to the banks’ asset quality because Moody’s expects this segment to be the most vulnerable to interest rate hike.
“While India’s economic growth will moderate driven by rising rates and a global slowdown, the Indian economy will perform better than emerging market peers. Because of these factors, the operating environment will remain supportive for banks,” Moody’s said. Moody’s expects the banks’ asset quality to be healthy over the next 12-18 months, helped by a supportive operating environment, improved corporate balance sheets, and better retail underwriting quality. The improvement in asset quality has translated into higher profitability because of lower credit costs. Moody’s expects this increase in profitability to be sustainable over the next 12-18 months.
