The Hindu Business Line : Six banks, 3 corporates ratings upgraded

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Mumbai Jan. 30 Standard & Poor's Ratings Services has upgraded the ratings of six Indian banks and three corporates. S&P has raised the ratings of State Bank of India, ICICI Bank Ltd, IDBI Ltd, Bank of India, Indian Overseas Bank and UTI Bank Ltd to "BBB-/Stable/A-3" from "BB+/Positive/B".

It has also upgraded the corporate credit ratings of Indian Oil Corporation Ltd, NTPC Ltd and National Hydroelectric Power Corporation Ltd to `BBB-' from `BB+'.

Helped by a growth in fee income, improving asset quality despite a possible increase in absolute NPA and improving risk management practices, S&P expects the performance of Indian banks to improve in 2007.

Retail exposure

The banks' retail exposure may further expand in the medium term, aided by "under-penetration of retail financial services" and improving disposable income that enhances the sizeable middle-income population's debt servicing ability, said a press release by S&P. "The sustained healthy economic growth over the past few years has improved credit demand from corporations," said the statement.

"S&P's also revised the Bank Fundamental Strength Rating (BFSR) of IDBI to `C' from `D+'. BFSR for the other five banks continues to be `C'," said the statement.

"It is a welcome move, and the strengths of the bank are getting revealed," said Mr V.P. Shetty, Chairman and Managing Director, IDBI Ltd. "Maintaining a consistent growth for the banking industry is a concern," he said.

Recent measures such as oil bonds to compensate for under-recoveries and allowing IOC to reduce its equity holding in other government-controlled petroleum sector entities signify strong Government support for the company, said the international ratings agency. "Going forward, as the Indian energy market liberalises and market-determined pricing is introduced, S&P's would re-assess the level of government support for this entity," said the statement.

"For NTPC Ltd, the rating reflects the stand-alone credit profile of the company and its dominant market share in the electricity generation sector. Although NTPC is not expected to be in need of direct financial support from the Government, S&P's considers that this is indirectly manifested through the high collections on sales made to financially weak State Government-owned electricity utilities,"it added.

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