Moody’s downgrades ICICI Bank, HDFC Bank, Axis Bank, LIC
15 May 2012 3:41 AM GMT
Credit ratings agency Moody’s on Monday downgraded India’s three top private sector lenders - ICICI Bank, HDFC Bank and Axis Bank - on growing concerns over the country’s sovereign debt ratings.
It also downgraded financial institution LIC following its recent investments in the oil and gas giant ONGC as well as a number of state-owned banks.
The Life Insurance Corporation lost its higher rating as Moody’s downgraded it from Baa2 to Baa3, although it kept the outlook stable.
Moody’s lowered the standalone ratings of the top three private sector lenders to the sovereign ratings level of D+ from earlier C-. The lenders’ hybrid rating is also lowered a notch to Baa2 from Baa3.
‘The downward revision to the three Indian banks’ standalone ratings reflects Moody’s assessment that their creditworthiness are highly correlated with that of the Indian government’s credit strength,’ Moody’s said.
For all three banks, the key drivers for the rating action were: relatively low level of cross-border diversification of their operations; high level of balance-sheet exposure to domestic sovereign debt, compared with their capital bases; franchise resilience and intrinsic strength within the operating environment; and absence of ongoing support from foreign ownership.
‘Our review indicated that there are little, if any, reasons to believe that these banks would be insulated from a government debt crisis,’ Moody’s said.
Moody’s pointed out that all these three lenders have significant direct exposure to the Indian government securities: equivalent to 239 per cent of tier-1 capital at Axis Bank, 226 per cent of tier-1 capital of HDFC Bank, and 143 per cent of tier-1 capital at ICICI Bank.
‘With assets of Rs 4,736.47 billion as on 31 March 2012, ICICI Bank is India’s largest private sector lender followed by HDFC Bank with assets of Rs 3,379.10 billion and Axis Bank Rs 2,856.28 billion.
‘LIC’s increased investment in ONGC and increasing investment in public sector banks are credit-negative,’ Moody’s Investors Service analyst and assistant vice-president for financial institutions group Stella Ng said.
It also downgraded financial institution LIC following its recent investments in the oil and gas giant ONGC as well as a number of state-owned banks.
The Life Insurance Corporation lost its higher rating as Moody’s downgraded it from Baa2 to Baa3, although it kept the outlook stable.
Moody’s lowered the standalone ratings of the top three private sector lenders to the sovereign ratings level of D+ from earlier C-. The lenders’ hybrid rating is also lowered a notch to Baa2 from Baa3.
‘The downward revision to the three Indian banks’ standalone ratings reflects Moody’s assessment that their creditworthiness are highly correlated with that of the Indian government’s credit strength,’ Moody’s said.
For all three banks, the key drivers for the rating action were: relatively low level of cross-border diversification of their operations; high level of balance-sheet exposure to domestic sovereign debt, compared with their capital bases; franchise resilience and intrinsic strength within the operating environment; and absence of ongoing support from foreign ownership.
‘Our review indicated that there are little, if any, reasons to believe that these banks would be insulated from a government debt crisis,’ Moody’s said.
Moody’s pointed out that all these three lenders have significant direct exposure to the Indian government securities: equivalent to 239 per cent of tier-1 capital at Axis Bank, 226 per cent of tier-1 capital of HDFC Bank, and 143 per cent of tier-1 capital at ICICI Bank.
‘With assets of Rs 4,736.47 billion as on 31 March 2012, ICICI Bank is India’s largest private sector lender followed by HDFC Bank with assets of Rs 3,379.10 billion and Axis Bank Rs 2,856.28 billion.
‘LIC’s increased investment in ONGC and increasing investment in public sector banks are credit-negative,’ Moody’s Investors Service analyst and assistant vice-president for financial institutions group Stella Ng said.
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