Moody's downgrades SBI's debt and local currency rating to junk--ET 23.09.2013
KOLKATA: Moody's Investors Service has downgraded State Bank of India's senior unsecured debt and local currency deposit ratings to Baa3 or lowest investment grade rating from Baa2 and changed the outlook on SBI's financial strength rating to negative from stable as the economic slowdown puts pressure on the bank's credit quality.
The revised ratings is on par with Government of India's (Baa3 Stable) foreign currency bond rating.
Moody's said the combination of increasing pressure on credit fundamentals and the ongoing reliance on the fiscally constrained Indian government to maintain capital adequacy ratio are factors behind the rating downgrade at a level no higher than the sovereign.
The outlook for SBI's senior unsecured debt and local currency deposit is however stable.
The global rating firm has in the last week of August lowered its outlook for India's GDP growth to 4.5% from 5.5%, reflecting the recent depreciation of the rupee, which will exacerbate inflationary pressures, keeping domestic interest rates relatively high and hindering a recovery in domestic demand growth.
"Such weaker conditions will negatively affect the asset quality, profitability, and capital of public sector banks, including SBIBSE -5.39 %," it said.
SBI's first quarter net profit dipped to Rs 3,241.1 crore from Rs 3,752 crore as its gross NPAs grew to 5.6% from 4.99%, a year ago.
Government banks have been facing strain in asset quality due to cash flow mismatches for companies amid business downturn. A pile of restrcutured loans has made banks' asset quality more vunerable.
http://economictimes.indiatimes.com/news/news-by-industry/banking/finance/moodys-downgrades-sbis-debt-and-local-currency-rating-to-junk/articleshow/22947105.cms
Fitch cuts viability ratings of PNB, BoB, Indian Bank-Business Standard 23.09.2013
Affirms issuer default rating for SBI, IDBI, ICICI and Axis Bank
Rating agency Fitch has downgraded the viability rating of Punjab National Bank, Bank of Baroda and Indian Bank from ‘bbb-’ to ‘bb+’, citing deteriorating asset quality and higher provisioning for stressed assets portfolios.
Revenue growth was slowing due to lower loan growth and the margins were squeezed due to high funding costs; this had led to pressure on internal capital generation, Fitch said.
It also cut Chennai-based Indian Bank’s long-term (LT) issuer default rating (IDR) from ‘BBB-‘ to ‘BB+’. The agency affirmed the LT IDRs of State Bank of India (SBI), Canara Bank, IDBI Bank, ICICI Bank and Axis Bank at ‘BBB-’. Following the rating action, the outlook on the IDRs of the nine banks is stable.
Fitch also affirmed the viability ratings of SBI, ICICI Bank and Axis Bank at ‘bbb-’, Canara Bank at ‘bb+’ and IDBI Bank at ‘bb’.
The rating actions follow a review of the Indian banking sector against the backdrop of sharp deceleration in economic growth and Fitch’s expectation of further deterioration in asset quality. The economic slowdown was likely to be more protracted than initially expected, owing to the currency volatility in recent months and the persistent high inflation, Fitch said in a statement.
The asset quality of Indian banks (particularly state-owned ones) would worsen, the rating agency said, adding this might result in more stressed assets than initially estimated; such assets would peak in FY15, rather than this financial year. The equity buffer of many public sector banks seemed increasingly stretched compared to their private peers, despite regular capital injections from the government, it said.
At the end of June this year, the stressed asset books (gross non performing loans and restructured loans) of Indian banks stood at 10 per cent of loans. Non-performing assets stood at 3.9 per cent.
Fitch said the outlook for the agriculture sector had improved following a good monsoon, and this would provide some cushion to the expected decline in growth. Stress tests show most public sector banks are sensitive to further deceleration in economic growth, owing to their high exposure to the infrastructure and cyclical sectors, as well as their high foreign-currency lending.
For private banks, earnings and capital buffers were at levels significantly higher than those at their state-owned counterparts.
Revenue growth was slowing due to lower loan growth and the margins were squeezed due to high funding costs; this had led to pressure on internal capital generation, Fitch said.
It also cut Chennai-based Indian Bank’s long-term (LT) issuer default rating (IDR) from ‘BBB-‘ to ‘BB+’. The agency affirmed the LT IDRs of State Bank of India (SBI), Canara Bank, IDBI Bank, ICICI Bank and Axis Bank at ‘BBB-’. Following the rating action, the outlook on the IDRs of the nine banks is stable.
Fitch also affirmed the viability ratings of SBI, ICICI Bank and Axis Bank at ‘bbb-’, Canara Bank at ‘bb+’ and IDBI Bank at ‘bb’.
The rating actions follow a review of the Indian banking sector against the backdrop of sharp deceleration in economic growth and Fitch’s expectation of further deterioration in asset quality. The economic slowdown was likely to be more protracted than initially expected, owing to the currency volatility in recent months and the persistent high inflation, Fitch said in a statement.
The asset quality of Indian banks (particularly state-owned ones) would worsen, the rating agency said, adding this might result in more stressed assets than initially estimated; such assets would peak in FY15, rather than this financial year. The equity buffer of many public sector banks seemed increasingly stretched compared to their private peers, despite regular capital injections from the government, it said.
At the end of June this year, the stressed asset books (gross non performing loans and restructured loans) of Indian banks stood at 10 per cent of loans. Non-performing assets stood at 3.9 per cent.
Fitch said the outlook for the agriculture sector had improved following a good monsoon, and this would provide some cushion to the expected decline in growth. Stress tests show most public sector banks are sensitive to further deceleration in economic growth, owing to their high exposure to the infrastructure and cyclical sectors, as well as their high foreign-currency lending.
For private banks, earnings and capital buffers were at levels significantly higher than those at their state-owned counterparts.
My Opinion
Rating agencies are exposing the bitter truth of Indian banks .The most interesting story of rating is that banks which are and which were always treated as best banks , leading banks and shining banks are rated rotten . An experienced and true bank may easily imagine of the factual current status of other public sector banks which were already running behind in all parameters of tests to ascertain the health and grwoth prospective of any bank.
Some top officials of the bank have remained always optimistic and have always given positive outlook about Indian banks knowing very well that internal position of the banks were moving fast from bad to worse. Still they portrayed the bank's image as bright and shining and prosperous. It was because they are the persons who are mainly responsible for creating such deep rooted mess in public sector banks. It is they who in greed of better posting and better personal career remained busy in flattery to ministers, who wilfully sacrificed the interest of the bank, who fraudulently inflated the profit , who won the heart of ministers by window dressing in deposits and advances and so on. It is they who played with quality of credit disbursal in an attempt to achieve the target and it is they who inculcated such bad culture in juniors and built pressure on juniors to follow their bad orders and to achieve the Branch target by hook or by crook. It is they who promoted flatterers even if they caused loss to banks and it is they who humiliated officers who were truely loyal to banks.
Some top officials of the bank have remained always optimistic and have always given positive outlook about Indian banks knowing very well that internal position of the banks were moving fast from bad to worse. Still they portrayed the bank's image as bright and shining and prosperous. It was because they are the persons who are mainly responsible for creating such deep rooted mess in public sector banks. It is they who in greed of better posting and better personal career remained busy in flattery to ministers, who wilfully sacrificed the interest of the bank, who fraudulently inflated the profit , who won the heart of ministers by window dressing in deposits and advances and so on. It is they who played with quality of credit disbursal in an attempt to achieve the target and it is they who inculcated such bad culture in juniors and built pressure on juniors to follow their bad orders and to achieve the Branch target by hook or by crook. It is they who promoted flatterers even if they caused loss to banks and it is they who humiliated officers who were truely loyal to banks.
It is unfortunate that management of public sector banks is still in the hands of corrupt officials who are continuing their ill habits in the same way . Quality of credit processing is still bad and there is complete lack of monitoring . Officers working in branches are under such hug pressure that they somehow or the other disburse loan to any Tom Dick and Hurry so that their target is exceeded and their bosses become happy. This is why slippage of advances from standard to Non Performing Asset category is very quick , say two to three years of sanction. RBI is totally unaware of such unhealthy culture. Majority of branches are working under huge mental pressure and hence they cannot safeguard bank's interest. It s absolutely beyond my imagination that officers who are always in fear of action from bosses and who are always threatened of transfer can work wisely and safely. The key target of majority of field functionaries is to please the boss and not to safeguard bank.
Monitoring of advances is almost nil because most of the branches are suffering from staff shortage or they are pulling the branches with totally inefficient staff . Good officers have either left attending promotion processes or have been posted at insensitive posts or shunted in remote areas. The greatest fun is that top management still feel proud of having merit oriented promotion policy , of having best training system , of having world level Human Resource Management policy and so on. RBI also use to cry loudly that public sector banks are safer than ever before. MOF always says that banks in India are better than foreign banks and private banks all over the world.
Ministers talk of various ratios derived from balance sheet of banks in the same way they feel proud of GDP rate despite the suffering of majority of population of India. Banks are called safe though assets are bad. The most painful is that there is no effort to ensure posting of enough quality staff in all branches. Top executives of the bank want to lead their life levishly sitting in AC cabin and hence they use to keep a good number of quality staff in administrative offices . Branches are suffering staff shortage but administrative offices have surplus staff in general.It means workers are less but controllers of workers are more.
Only God can save Indian banks and there is no doubt that rating of Indian banks will move from bad to worse.Government of India will comes to senses and RBI officials come out of hibernation only when some bank collapse or when the thing goes beyond control. It is only when a bank fails or on the verge of failing , the regulators and GOI comes into action , form a committee and ultimately the same is merged with some better bank. This has happened so many times in the past. I doubt whether anyone takes lesson from mistakes of the past.
A bank become sick not in a year or two , assets of the banks have not gone bad overnight and working officers have not become negligent and yesman not because of fault of any executive or any policy but all these have happened only due to prolonged bad culture , consistent fraud in implementation of good policies and prolonged negligence by regulators . This is why private banks have grown by leaps and bounds whereas public sector banks are moving from bad to worse , are being rated downwards and are sold in share market at least PE. Rating agencies treat PS banks as junk but GOI still feel proud of these banks.
It is just like the fact that Government is blamed in failing in containing price rise by common men, is accused of promoting scams , is blamed of suffering from policy paralysis and administrative deficit but the central government led by persons like Manmohan Singh and Chidambram feel proud of higher GDP growth than that of other countries. American are happier than Indians despite the fact that their GDP growth i less than that of India.
Indians are sick and sinking day by day , but India claim to have highest GDP growth.Corporate houses are growing wealthier and wealthier but they are sick in the eye of their bankers.
Indians are sick and sinking day by day , but India claim to have highest GDP growth.Corporate houses are growing wealthier and wealthier but they are sick in the eye of their bankers.
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