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Credit rating agency Crisil has reaffirmed its ratings on ICICI Bank’s debt instruments – Upper Tier-II Bonds aggregating ₹8,495 crore, Tier-I Perpetual Bonds aggregating ₹518 crore, and Bonds/Debentures aggregating ₹629 crore – at ‘AAA/Stable’.
Instruments with ‘AAA’ rating are considered to have the highest degree of safety regarding timely servicing of financial obligations. Such instruments carry the lowest credit risk.
While re-affirming the ratings, the agency said it has taken note of ICICI Bank board’s response to the recent allegations of potential conflict of interest pertaining to the bank’s exposure to Videocon Group.
Crisil believes that this exposure, which has already been classified as a non-performing asset (NPA) with sizeable provisioning by the bank, is in itself not material in the context of its outstanding loan book or capital. Any further provisioning, or even write-offs pertaining to that exposure, are not likely to impact the bank’s credit risk profile, it added.
The agency anticipates continuation in ICICI Bank’s strategy of building upon its strong market position in the Indian wholesale and retail lending markets, while maintaining its healthy capitalisation levels and strong liability franchise even as it strives to improve its asset quality.
Crisil said it will also monitor developments pertaining to the ongoing investigations on the bank’s exposure to the Videocon Group to watch out for any potential materiality in outcomes on areas like management stability or fund-raising ability and suitably factor them in its rating.
“The ratings on ICICI Bank’s debt instruments continue to reflect the bank’s healthy capitalisation, strong market position and comfortable resource profile. These strengths are tempered somewhat by the pressure on the bank’s asset quality from exposures to highly-leveraged corporate groups,” the agency said.
However, the bank’s healthy capital position, coupled with its demonstrated ability to raise capital and steady pre-provisioning profits, cushions the bank’s credit risk profile against asset quality risks.
Meanwhile, the asset quality performance of the bank’s retail asset portfolio that constitutes almost half of the bank’s advances mix as on December 31, 2017, is expected to remain stable over the medium term.
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