SBI, PNB, BoB lose 3% on Fitch, Moody's downgrade
A day after banking stocks took it on the chin due to 25 basis points repo rate hike by RBI, rating agency Moody's downgraded State Bank of India's -- India's largest lender -- unsecured debt and rupee deposits to Baa3 from Baa2, citing asset quality and recapitalisation concerns.
September 24, 2013 / 12:59 IST
Moneycontrol Bureau
India's leading PSU banks remained under selling pressure in morning trade Tuesday after foreign rating agencies downgraded their debts.Top lenders in PSU space - State Bank of India, Punjab National Bank, Bank of Baroda and Indian Bank shares lost 2.5-3.5 percent whereas private lenders ICICI Bank and Axis Bank bounced back after initial weakness.After banking stocks took it on the chin due to 25 basis points repo rate hike by RBI, rating agency Moody's downgraded State Bank of India's unsecured debt and rupee deposits to Baa3 from Baa2, citing asset quality and recapitalisation concerns."A combination of increasing pressure on credit fundamentals and ongoing reliance on fiscally constrained government to maintain capital at levels desired by regulators argue for appropriateness of supported debt and deposit ratings at a level no higher than the sovereign," Moody's said in a statement.The rating agency also cut its outlook on SBI's financial strength rating to negative.Also Read - SBI well capitalised; rating cut won't impact local biz: MDOn the recapitalisation front, Moody's said SBI will have to compete with other state-run banks for its share in the Rs 14,000 crore allocated in the budget.India's largest lender had disappointed the street with its first quarter net profit falling higher-than-expected nearly 14 percent year-on-year to Rs 3,241 crore, dented by higher provisions against bad loans and muted growth in the net interest income, which grew just by 3.5 percent to Rs 11,512 crore in April-June quarter from Rs 11,119 crore.Meanwhile, Fitch Ratings today downgraded Indian Bank's long-term (LT) issuer default rating (IDR) to 'BB+' from 'BBB-' and its viability rating (VR) to 'bb+' from 'bbb-'. Simultaneously, Fitch has downgraded Punjab National Bank's (PNB) and Bank of Baroda's (BoB) volatility rating (VR) by one notch to 'bb+' while affirming their long term (LT) issuer default rating (IDRs) at 'BBB-'.The agency has also affirmed the LT IDRs of State Bank of India, Canara Bank, IDBI Bank, Bank of Baroda New Zealand, ICICI Bank and Axis Bank at 'BBB-', and the VRs of SBI, ICICI and Axis at 'bbb-', Canara at 'bb+' and IDBI at 'bb'.The LT IDRs of SBI, BOB, PNB, Canara, IDBI and ICICI are at their Support Rating Floors (SRF), which is driven by their systemic importance as reflected in their support rating (SR) of '2'. The IDRs of SBI, ICICI and Axis are also driven by their stand-alone credit strength, which in the case of SBI and ICICI is currently at the same level as their SRF; Axis has a lower SRF of 'BB+' and SR of '3'. Fitch in its rating note, says Indian PSU banks are more sensitive to further economic slowdown.(With inputs from agencies) Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
