S&P Upgrades SBI First Time Since 2012, Raises Credit Rating Of HDFC Bank, ICICI Bank Too
SBI's standalone credit rating was revised upward to 'BBB' from 'BBB-', for the first time since 2012 when it was downgraded.
S&P Global Ratings has raised the standalone credit ratings of the State Bank of India, HDFC Bank Ltd., and ICICI Bank Ltd.
State Bank of India's standalone credit rating was revised upward to 'BBB' from 'BBB-', for the first time since 2012 when it was downgraded.
The rating upgrade reflects the bank's "lower credit risks and improving earnings", S&P Global Credit Ratings said in a noted dated June 26.
Indian banks will benefit from the country's "strong economic growth and better consumer and business confidence", S&P Global said in a note.
The credit rating agency also upgraded HDFC Bank's standalone credit rating to 'A-' from 'BBB+' on account of the bank's ability to "maintain its strong franchise and superior profitability over the next two years". These strengths will be further consolidated with the bank's merger with its parent—HDFC Ltd., the note said.
ICICI Bank's standalone credit rating was also revised to 'BBB' from 'BBB-'. The agency expects the bank to maintain its "strong market position in the Indian banking sector".
The bank's asset quality is likely to remain "better than the Indian sector average and comparable to that of similar-rated international peers", it said.
ICICI is also expected to maintain "good capitalisation over the next 12–18 months, supported by healthy earnings", according to it.
The agency does not rate Indian banks above the sovereign because of the direct and indirect influence that the sovereign has on banks operating in the country.
The American credit rating agency upgraded the ratings as it expects India's financial institutions, especially the public-sector banks, to sustain their improvement in capital positions.
Bank earnings will likely be comparable with other emerging market peers, even as margins may decline as the banks reprice deposits, it said.
The agency also raised long-term issuer credit ratings on Union Bank of India, Bajaj Finance Ltd., Shriram Finance Ltd. and Hero FinCorp Ltd.
