Money & Banking

Moody’s takes rating actions against 11 banks

Our Bureau Mumbai | Updated on June 02, 2020 Published on June 02, 2020

Downgrades long-term local and foreign currency deposit ratings of SBI, HDFC

Moody’s Investor Services on Tuesday took rating action against 11 Indian banks, which included a downgrade of the long-term local and foreign currency deposit ratings of State Bank of India and HDFC Bank.

This follows its downgrade of India’s sovereign rating to Baa3 from Baa2 with a negative outlook on Monday.

The ratings action has been taken against Bank of Baroda, Bank of India, Canara Bank, Central Bank of India, Export-Import Bank of India, HDFC Bank, Indian Overseas Bank, IndusInd Bank Limited, Punjab National Bank, SBI and Union Bank of India.

“The banking sector has been affected given the disruptions to India’s economic activity from the coronavirus outbreak, which is weakening borrowers’ credit profiles. Moody’s regards the coronavirus outbreak as a social risk under its environmental, social and governance framework, given the substantial implications for public health and safety,” it said in a statement.

The agency expects the standalone credit profiles or BCAs of most rated state run banks to deteriorate as the economic shock will strain their already weak solvency. It also expects their capitalisation to be impacted.

For the private sector banks covered, Moody’s said it expects their asset quality and profitability to deteriorate driven by rising loan delinquencies and defaults due to the coronavirus outbreak, which will result in an increase in credit costs.

However, they have better loss absorbing capacities and stronger BCAs than their public sector counterparts, it said.

“Moody’s has downgraded the long-term local and foreign currency deposit ratings of HDFC Bank and SBI to Baa3 from Baa2, and the long-term issuer rating of EXIM India to Baa3 from Baa2. Moody’s has maintained their rating outlooks as negative,” the global rating agency said, adding that the deposit ratings of these banks are at the same level as India’s Baa3 sovereign rating.

“Consequently, Moody’s has downgraded HDFC Bank’s Baseline Credit Assessment (BCA) to baa3 from baa2,” it further said.

It has placed the Baa3 long-term local and foreign currency deposit ratings of BOB, BOI, Canara and UBI and their ba3 BCAs under review for downgrade.

The agency has also downgraded IndusInd’s long-term local and foreign currency deposit ratings to Ba1 from Baa3 and its BCA to ba2 from ba1. “The rating outlook is negative,” it further said.

Moody’s has affirmed PNB’s long-term local and foreign currency deposit ratings at Ba1 and its BCA at b1. The rating outlook of PNB is changed to stable from positive.

In the case of CBI and IOB, Moody’s has affirmed their long-term local and foreign currency deposit ratings at Ba2 and their BCAs at b2 and their rating outlook is maintained as stable.

Published on June 02, 2020
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