Fitch affirms eight banks' IDRs as 'stable'

Fitch Ratings on Tuesday that it has affirmed Issuer Default Rating (IDR) of eight Indian banks. 

These banks are: State Bank of India (SBI), Bank of Baroda (BoB), Bank of Baroda (New Zealand) Limited (BoB NZ), Punjab National Bank (PNB), Canara Bank (Canara), Bank of India (BoI), ICICI Bank Ltd. (ICICI) and Axis Bank Ltd. (Axis). Fitch Ratings said that these banks have been affirmed ratings at 'BBB-'.

It further said that the outlook on these IDRs are 'stable'.

Fitch said that it is maintaining the negative sector outlook on Indian banks. "This is based on our assessment that the sector's core capitalisation, which has been eroded in the last few years, will remain challenged unless it is boosted by adequate capital support from the authorities or equity raising from capital markets," it said. 

"In addition, Basel III capital migration is entering its final phase with capital requirements at their most onerous. Internal capital generation is expected to remain weak due to the banks' subdued growth outlook while there could be significant pressure stemming from continued provisioning due to ageing of outstanding non-performing loans (NPLs) and the potential resolution of some large NPLs," Fitch said. 

Loan growth of Indian banks, at around 5%, was lowest in six decades while stressed-assets ratio rose to 12.3% in FY17 as against 11.5% a year ago.  

Fitch Ratings said, "Asset quality at large private banks also deteriorated, albeit from a relatively lower base."

Asset quality could witness some further downside risks due to emerging concerns in the power and farm sectors although slippages are not likely to be as large as in previous years, it added. 

The rating actions are as follows: 

SBI:
- Long-Term IDR affirmed at 'BBB-'; Outlook Stable
- Short-Term IDR affirmed at F3'
- Viability Rating affirmed at 'bbb-'
- Support Rating affirmed at '2'
- Support Rating Floor affirmed at 'BBB-'
- USD10bn MTN programme affirmed at 'BBB-'
- USD4.65bn senior unsecured notes affirmed at 'BBB-' 

PNB:
- Long-Term IDR affirmed at 'BBB-'; Outlook Stable 
- Short-Term IDR affirmed at 'F3'
- Viability Rating affirmed at 'bb'
- Support Rating affirmed at '2'
- Support Rating Floor affirmed at 'BBB-'

Bank of Baroda:
- Long-Term IDR affirmed at 'BBB-'; Outlook Stable
- Short-Term IDR affirmed at 'F3'
- Viability Rating affirmed at 'bb+' 
- Support Rating affirmed at '2'
- Support Rating Floor affirmed at 'BBB-'
- USD3bn MTN Programme affirmed at 'BBB-'
- USD1bn senior unsecured notes affirmed at 'BBB-'

BOBNZ:
- Long-Term IDR affirmed at 'BBB-'; Outlook Stable
- Support Rating affirmed at '2'

Canara Bank:
- Long-Term IDR affirmed at 'BBB-'; Outlook Stable
- Short-Term IDR affirmed at 'F3'
- Viability Rating affirmed at 'bb'
- Support Rating affirmed at '2'
- Support Rating Floor affirmed at 'BBB-'
- USD2bn MTN programme affirmed at 'BBB-'
- USD500m senior unsecured notes affirmed at 'BBB-'

Bank of India:
- Long-Term IDR affirmed at 'BBB-'; Outlook Stable
- Short-Term IDR affirmed at 'F3'
- Viability Rating downgraded to 'b+', from 'bb-'
- Support Rating affirmed at '2'
- Support Rating Floor affirmed at 'BBB-'
- USD5bn medium-term note programme affirmed at 'BBB-'
- USD1.75bn senior unsecured notes affirmed at 'BBB-'

ICICI Bank:
- Long-Term IDR affirmed at 'BBB-'; Outlook Stable
- Short-Term IDR affirmed at 'F3'
- Viability Rating affirmed at 'bbb-'
- Support Rating affirmed at '2'
- Support Rating Floor affirmed at 'BBB-'
- USD3.2bn senior unsecured notes affirmed at 'BBB-' 

Axis Bank:
- Long-Term IDR affirmed at 'BBB-'; Outlook Stable
- Short-Term IDR affirmed at 'F3'
- Viability Rating affirmed at 'bbb-'
- Support Rating affirmed at '3'
- Support Rating Floor affirmed at 'BB+' 
- USD5bn MTN programme affirmed at 'BBB-'
- USD2bn senior unsecured notes affirmed at 'BBB-'

Fitch Ratings said, "The theme of consolidation among public-sector banks has gained momentum in recent months. The authorities appear keen to reduce the number of government-owned banks and it is likely that the larger public-sector banks may be asked to play an active role to that effect. "

Banking share fell on Tuesday after RBI advised more provisioning to tackle bad loans issues. Public Sector Banks fell nearly 4% while private banks saw 1.5% decline.