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A month after downgrading the debt and deposits of State Bank of India, global rating agency Moody’s will do a performance review of the bank, the country’s largest lender, next week.
A senior SBI official said this was the annual visit of the Moody’s team to have a review meet with the top management. Moody’s had on September 23, downgraded the rating for SBI’s senior unsecured debt and local currency deposits from Baa2 to Baa3, due to rising pressure on the credit profile from the economic slowdown.
The new ratings are on a par with those for its owner, the Government of India's (Baa3 stable) foreign currency bonds.
The ongoing reliance on a fiscally constrained owner (the government) to maintain capital at the levels desired by the regulator (the Reserve Bank of India) also had a bearing on the rating action, the agency had said. It had affirmed SBI’s financial strength rating at D+ but changed the outlook on this parameter to negative from the earlier stable. An SBI executive said the interaction (for the review) is to focus on capital adequacy and asset quality (non-performing assets and restructured loan book) of the bank.
Also, Moody’s might look at the profitability parameters, due to pressure on net interest income in a business environment marked by economic slowdown. SBI had termed Moody’s downgrade action “unwarranted”, saying it had more than adequate capital to meet the regulatory norms and grow the business. The bank was taking every possible step to improve asset quality, which had slipped due to stress from the economic slowdown, Arundhati Bhattacharya, then managing director and chief financial officer had said.
SBI’s capital adequacy ratio was 12.09 per cent, with tier-I capital at 8.89 per cent in June (under the Basel-III norms). The impaired loan ratio (gross NPAs plus restructured loans) was 8.6 per cent at end-June, below the 11.5 per cent average for public sector banks rated by Moody's.
