 "India Ratings affirms AAA ratings to SBI, PNB")
The agency has also affirmed Punjab National Bank's long-term issuer rating at 'AAA' with a stable outlook and its short-term issuer rating at A1+.
"The rating is driven by SBI's competitive edge as the largest bank with a fundamentally strong funding profile supported by its large pan-India branch network, higher income diversity than most other public sector banks, comfortable capitalisation and reasonable profitability," the rating agency said today.
It also said despite the asset quality under cyclical stress, the average credit costs over the cycle would not be significantly different from other strong public sector banks.
On PNB, the report said, "the ratings are driven by expectations of extraordinary support from its majority and controlling shareholder (the government holds 56% stake), in case of a systemic crisis, due to its high importance," the report said.
According to the report, SBI's rating decision is also supported by the high probability of extraordinary government support if required due to the systemic importance of the largest lender.
"The rating is also supported by the high probability of extraordinary government support if required, given the bank's huge systemic importance," it said, adding the bank has 14,388 branches and is the sole banker in many economically backward geographies.
On asset quality, which has deteriorated in the recent past, the agency said the asset quality is likely to stabilise next fiscal with incremental bad loans likely to moderate in the near-term on the back of greater stress on credit risk in lending along with possible turnaround in the economy.
The report, however, said, "....The bank is likely to continue to demonstrate greater cyclicality given some of the policy roles that the bank performs."