Monday, April 30, 2012

Rating of Private Banks

Moody's may downgrade ICICI Bank, HDFC Bank and Axis Bank

MUMBAI: Global ratings agency Moody's Investors Service said on Monday it has placed on review India's three top private sector lenders ICICI BankHDFC Bankand Axis Bank for possible downgrade.

The review is mainly because of lower sovereign ratings of India.

Standalone credit assessment ratings of these lenders are currently positioned above India's sovereign debt rating.

"Moody's expects to position the standalone credit assessments of most banks globally at (or below) the rating of the sovereign where the bank is domiciled," Moody's said in a report.

The review is expected to be concluded in three months.

All the three lenders enjoy Baa2 foreign currency long-term ratings from Moody's. This is a medium grade rating and shows that these companies have acceptable ability to repay short-term debt.

Ratings agency Standard & Poor's last week cut its outlook to negative from stable on India's sovereign ratings and leading lenders including ICICI Bank, HDFC Bank, and Axis Bank.

A downgrade in rating means that the government or companies are less capable to meet their debt obligations. This results in higher cost to borrowings. Also it becomes difficult for the firms and the government to raise money from overseas markets.

Moody's said during the review it will assess the degree to which the company's standalone credit profile is correlated with that of the sovereign.

The reviews will take into account (i) the extent to which the banks' business depends on the domestic macroeconomic and financial environment; (ii) the degree of reliance on market-based, and therefore more confidence-sensitive, funding; and (iii) direct or indirect exposures to domestic sovereign debt, compared with their capital bases, it said.
On Moody’s watch: LIC, 3 private banks
HT Correspondent, Hindustan Times
Mumbai, April 30, 2012

Credit rating agency Moody’s has placed on watch state-owned giant Life Insurance Corporation (LIC) and three of India’s biggest private sector banks — ICICI Bank, HDFC Bank and Axis Bank —for a possible downgrade, with the review for the three banks expected to be completed within three 

Moody's action follows closely on the heels of another credit rating agency, Standard & Poor’s (S&P), downgrade on the outlook of 11 Indian financial institutions last week to negative from stable, following a similar outlook downgrade of India’s sovereign credit rating.
Experts believe that depositors and investors need not to worry much on the issue.
“Depositors money will not be impacted by Moody’s announcement as their financial health is in good shape,” said Dinesh Shukla, banking analyst at brokerage firm Sharekhan.  “Latest quarterly results of these three banks show that they are in growth trajectory. We do not see any major downside for these banks in near future,” he said, adding that he has a buy call on ICICI Bank and Axis Bank and hold on HDFC Bank. All three banks under review by Moody’s were also in the list of 11 financial institutions whose credit ratings outlook was downgraded to negative by S&P last week.
The immediate trigger for placing LIC on the review list for a possible downgrade is the bailout act performed by the insurer in the sale of the government’s 5% stake in the oil company, ONGC.
“LIC has been increasing its exposure to public sector banks through equity investment, in addition to the purchase of shares in ONGC, which is 69.14% owned by the Indian government in March 2012,” Moody’s said.

Above two news are collected from Economic Times and Hindustan Times Today on 1st of May 2012

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