Fitch retains SBI, five other public sector banks' rating at BBB- with stable outlook

Fitch Ratings on Thursday affirmed the ratings of the nation's six public sector lenders, including State Bank of India (SBI) and Bank of Baroda (BoB), at BBB- with stable outlook. The other banks which the agency rated BBB- with stable outlook are Punjab National Bank, Canara Bank, Bank of India, and Union Bank of India.

The rater has also affirmed these banks' viability rating at BB and its government support rating of BBB-. On retaining the long-term issuer default rating of SBI, the agency said the rating is support-driven, with the government support rating (GSR) above the viability rating (VR). SBI's GSR is the same as the sovereign rating of BBB- with stable outlook, reflecting the agency's view that SBI has the highest probability of extraordinary state support among the banks. The stable outlook mirrors that on the sovereign's own rating, it added.

Revising the operating environment score of the bank to BB+ from BB, the agency said it reflects the view of structural improvement since the onset of Covid pandemic. The rating revision also reflects the agency's view of the bank's ability to generate business consistently through the cycle while managing risk better than its peers.

The agency also revised the outlook on SBI's asset quality score of BB- to positive, from stable, as it expects the four-year average impaired loans ratio to further improve over the near term. Meanwhile, the rating agency also affirmed the long-term rating of the second largest state-owned lender Bank of Baroda and its New Zealand subsidiary BBB- with stable outlook.