Money & Banking

Axis Bank clarifies downgrade by S&P is an ‘editorial error’

Hemani Sheth Mumbai | Updated on June 28, 2020 Published on June 28, 2020

The bank’s rating outlook is ‘Stable’

Axis Bank on Saturday clarified that global rating agency Standard and Poor had made an error by inadvertently mentioning that the bank was on CreditWatch and that it is on Stable outlook.

The private sector lender in a notification to stock exchanges had clarified that S&P had made an editorial error.

“As confirmed by S&P, the rating report inadvertently mentions the bank being on CreditWatch. In this regard, S&P has confirmed that it is an editorial error and bank is on STABLE outlook,” the bank said.

As per the rating action letter by S&P Global Ratings Axis Bank’s current issuer ratings stands at BB+/Stable/B from previous BBB-/Negative/A-3 rating.

The stable rating had been given considering that the bank must have factored in the deterioration in its asset quality over the next 12 months, the rating agency stated.

“We lowered our ratings on Axis to reflect our expectation that heightened economic risks facing India's banking system will affect the bank's asset quality and financial performance. While Axis' asset quality is superior to the Indian banking sector average, its level of non-performing assets (NPAs) will likely remain high compared to international peers',” reads the S&P letter.

“Nevertheless, we expect the bank to maintain its strong market position and adequate capitalization. The stable outlook reflects our view that our ratings on Axis already factor in some deterioration in the bank's asset quality and performance over the next 12 months,” it said.

It could upgrade or downgrade the ratings of the bank based on its future performance, the letter added.

“We could lower the ratings on Axis if the bank's stressed assets rise significantly beyond the system average over the next few quarters. We could raise our ratings on Axis if the bank's performance, particularly its asset quality, is significantly superior to that of domestic peers and commensurate with international peers' over the next 18 months,” it said.

S&P had recently downgraded the ratings of Axis Bank along with four Indian non-bank financiers (NBFC)s stating that the increased risks posed by the Covid-19 pandemic will worsen operating conditions.

“We expect a recession to hurt the financial sector,” it said in a release.

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Published on June 28, 2020
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