The rating outlook is stable.
The senior debt rating is subject to receipt of final documentation, the terms and conditions of which are not expected to change in any material way from the draft documents reviewed by Moody's.
RATINGS RATIONALE
HDFC Bank's senior unsecured debt rating of Baa2 is underpinned by the bank's BCA of baa2. Moody's also assumes a high probability of support for the bank from the Government of India (Baa2 stable) in the event of financial distress, considering HDFC's status as the largest private sector bank in India by assets, large retail deposit franchise and importance to the national payments system. Given that the bank's BCA is already at baa2, this high support assumption does not result in any additional uplift to the bank's deposit or debt ratings.
HDFC Bank's BCA of baa2 reflects the bank's standalone credit strength and prudent underwriting policies, which have led to its superior financial performance when compared with similarly rated peers in India. The bank's BCA also reflects its consistent and strong financial results. Specifically, its performance in terms of profitability, capital and asset quality metrics has been better than the average for the Indian banking system.
WHAT COULD CHANGE THE RATINGS -- UP
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HDFC Bank's deposit and senior unsecured ratings could be upgraded, if India's sovereign rating is upgraded.
WHAT COULD CHANGE THE RATINGS -- DOWN
Downward pressure on HDFC's BCA and ratings could arise from: (1) a sustained deterioration in impaired loans or loan-loss reserves; (2) a significantly higher new nonperforming loan formation rate than that previously experienced; (3) a decline in earnings, leading to a significant decrease in internal capital generation; or (4) a downgrade in the sovereign's foreign-currency debt rating.
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