Moody's downgrades SBI debt ratings, changes financial strength outlook to ... - Economic Times

KOLKATA: Moody's Investors Service has downgraded State Bank of India's (SBI) senior unsecured debt and local currency deposit ratings to 'Baa3' or lowest investment grade rating from Baa2 and changed the outlook on its financial strength rating to 'negative' from stable, as the economic slowdown puts pressure on the credit quality of India's largest lender. The revised rating is on par with Government of India's (Baa3 Stable) foreign currency bond rating. However, the outlook for SBI's senior unsecured debt and local currency deposit is stable, Moody's said in a statement issued from Singapore. The global ratings firm said the combination of increasing pressure on credit fundamentals and the ongoing reliance on the fiscally-constrained Indian government to maintain capital adequacy ratio ( CAR) are the factors behind the ratings downgrade at a level no higher than the sovereign. In the last week of August, it lowered the outlook for India's GDP growth to 4.5% from 5.5%, reflecting the depreciation of the rupee which will put inflationary pressures and keep domestic interest rates relatively high. "Such weaker conditions will negatively affect the asset quality, profitability, and capital of public sector banks, including SBI," it said. SBI's first quarter net profit dipped to Rs 3,241 crore from Rs 3,752 crore, as its gross non-performing assets ratio slipped to 5.6% from 4.99% a year ago. Government banks have been facing strain in asset quality due to cash flow mismatches for companies amid business downturn. A pile of restructured loans has made banks' asset quality more vulnerable. The sluggish economic growth has already led to a sharp rise in NPAs for Indian banks, with the gross ratio touching 3.9% in June. The Reserve Bank of India (RBI) estimated that gross NPA may rise to 4.4%, if the macro-economic situation does not improve. Moody's expects SBI's loans to grow at 20% for the fiscal year ending March 2014, exceeding Moody's estimated 15% for the country's banking system. "Consistently high loan growth, together with rising problem assets, lower margins, and additional provisioning requirements imply that SBI's capitalisation levels will decline without external capital injections," it said. It has also downgraded SBI's London and Honk Kong branches to 'BAA3' or junk from 'BAA2'. Fitch Cuts PNB, BoB Ratings MUMBAI: Global rating agency Fitch on Monday downgraded viability ratings of the state-run PNB and Bank of Baroda by one notch to 'BB+' from 'BBB-' while retaining their long-term issuer default ratings at 'BBB-'. On BoB, the Fitch report said, 50% of its loan book (both onshore and offshore loans) is foreign-currency denominated, which could be a greater source of instability to its credit profile given the recent currency volatility. The viability rating is an indicator of a bank's credit-worthiness. Copyright © 2013 Times Internet Limited. All rights reserved. via Business - Google News http://news.google.com/news/url?sa=t&fd=R&usg=AFQjCNH4-1c-FNEZXlneOgekWo1OdF2V8A&url=http://economictimes.indiatimes.com/markets/stocks/stocks-in-news/moodys-downgrades-sbi-debt-ratings-changes-financial-strength-outlook-to-negative/articleshow/22955664.cms

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