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Fitch Ratings has affirmed Kotak Mahindra Bank Ltd’s national long-term rating at ‘Fitch AA+(ind)’ with a stable outlook. In addition, its national short-term rating has been affirmed at ‘Fitch A1+(ind)’.
Kotak Mahindra Bank’s ratings benefit from its consistently above-average core capital, which together with its risk management capabilities, partly mitigate cyclical asset quality pressures on the group’s loan portfolio.
The ratings are constrained by the bank’s small franchise and greater wholesale funding profile compared with higher-rated private banks. The bank’s consistently above-average loan growth and portfolio concentration in cyclical sectors also constrain the ratings.
According to Fitch, Kotak Mahindra Bank’s above-average capital position is vital for its high concentrations in segments like commercial vehicle (15 per cent of gross loans), loans secured by property, which is mainly to small businesses/self-employed (11 per cent), and real estate (13 per cent).
It said the bank’s loan portfolio may face asset quality pressures in FY’13 and FY’14 given India's economic slowdown.
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