- State Bank of India, Bank of Baroda, Punjab National Bank debt rating downgraded by rating agenciesBSE Sensex falls 118 points, SBI, PNB, BoB shares fallState Bank of India's shares, other state banks fall on rating agency downgradeHDFC, ICICI Bank shares lead gains, BSE Sensex rises
State Bank of India (SBI), on Tuesday, termed the downgrade by Moody's Investor Services of the lender's unsecured debt and rupee deposits as unwarranted. SBI claims it remains well capitalised and said its growth is supported by strong risk mitigation measures.
“We had advised Moody’s against the concerns raised by them. We feel these concerns are misplaced,” said Arundhati Bhattacharya, MD and CFO, SBI.
Moody's, on Monday, had cut the ratings on the unsecured debt and rupee deposits of SBI to Baa3 from Baa2, citing negative pressures on the bank's financials. The rating agency had also lowered the outlook on the bank's financial strength to negative from stable.
“This downgrade will not affect our plans to raise funds locally or internationally since investors had already factored in that we had been rated above the sovereign rating earlier,” said Hemant Contractor, MD and group executive, international banking, SBI.
Contractor confirmed the bank had no immediate plans to tap the international market by issuing medium term notes (MTN). Relying heavily on the government for capital was a weakness, the rating agency pointed out in a release which also dwelt on the lender’s deteriorating asset quality. SBI’s Tier 1 capital ratio at the end of June stood at 9.01%.
Allaying these fears, Bhattacharya said the bank is well capitalised as per the Basel III guidelines.
The rating agency observed that SBI's credit profile faced negative pressures owing to the slowdown in the economy, which it estimates will grow at 4.5% in FY14. The lender’s gross non-performing assets (npas) rose sharply in the April-June period to 5.6% of gross loans from 4.8% at end-March 2013 and 5.0% at end-June 2012.
“We are taking all required steps to control the stressed assets scenario. We are only lending to top-rated companies. But the stressed asset scenario will still depend on the broader economy,” Bhattacharya told newspersons.
SBI has also decided to not discount the letters of credit (LCs) issued by other banks to borrowers. This is a matter of priorities Bhattacharya confirmed. "Since the corporate bond market has become too expensive, companies are swinging back to the loan market, which has resulted in a recent spurt in credit growth. The bank will thus only discount LCs issued by itself or its group entities, " Bhattacharya said.
* We had advised Moody’s against the concerns raised by them. We feel these concerns are misplaced, says Arundhati Bhattacharya, MD and CFO