Moody’s Investors Service on Tuesday affirmed the long-term local and foreign currency deposit ratings of State Bank of India (SBI) at ‘Baa3’ while downgrading SBI’s BCA to ‘ba2’ from ‘ba1’.
Moody’s view that the bank’s asset quality and profitability will deteriorate on account of concern on asset quality due to moratorium therefore the rating agency downgraded SBI’s Baseline Credit Assessment (BCA).
It is to be noted, ‘Baa’ rating indicates moderate credit risk and ‘ba’ indicates substantial credit risk.
“As a result, Moody’s has also downgraded SBI’s foreign currency preferred stock non-cumulative MTN (medium term note) program rating to (P)B2 from (P)B1, and the rating of the preferred stock non-cumulative (Basel III compliant Additional Tier 1 securities) bond issued out of its DIFC branch to B2(hyb) from B1(hyb),” the statement said.
The resultant weakening in internal capital generation will reverse improvements in the bank’s financial metrics achieved over the past two years, it added.
Moody’s has maintained SBI’s rating outlook, where applicable, as negative, in line with the outlook on India’s sovereign rating.
This rating action concludes the review initiated on SBI’s BCA, adjusted BCA, junior securities, and the junior securities of its London, Hong Kong, DIFC and Nassau branches initiated on 2 June 2020, it said.
The economic shock from the coronavirus pandemic will exacerbate an already material slowdown in India’s economic growth, weakening borrowers’ credit profiles and hurting Indian banks’ asset quality, Moody’s said.
