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| Crisil gives -ve outlook to ICICI bonds, reaffirms AAA rating |
| BS Reporter / Mumbai Jul 17, 2009, 00:22 IST |
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Rating agency Crisil has lowered its outlook on two bonds of private sector lender ICICI Bank to negative from stable, while reaffirming the AAA rating on the financial services giant.
The bonds with lowered outlook included upper Tier II bonds and perpetual bonds, which together aggregated Rs 9,700 crore. It reaffirmed the AAA rating on the bonds and debentures issued by ICICI, the erstwhile development financial institution, which were transferred to ICICI Bank, post-merger.
The rating agency expected the bank’s core profitability to remain constrained in the near term because of shrinking fee income and higher level of provisioning. The success of the bank’s to reduce operating expenses and offset the cost of additional branches would be a key monitorable for ratings in 2009-10, the rating agency said in a statement today.
In an e-mail reply, the bank’s Executive Director and CFO N S Kannan said, “Crisil has reaffirmed its AAA rating on our debt instruments and highlighted our strong capitalisation, franchise and management capabilities. They have endorsed our strategy of Casa (current account and savings account balances) growth, cost reduction, credit control and capital conservation. The two pressure points that Crisil has mentioned — earnings and asset quality arising out of unsecured retail loans — are already being addressed by us and we are confident of achieving our goals in these areas.s.”
Though ICICI Bank’s unsecured retail loan portfolio accounted for under 10 per cent of its overall advances, the high level of delinquencies was a factor that weighed on Crisil.
“Arresting the rising trend in retail non-performing assets (NPAs) is taking the bank longer than expected, as a result of which the bank’s overall NPA level increased somewhat more in 2008-09 than Crisil had earlier projected. The rating agency expects NPAs to continue its rise in the near term,” Crisil said.
While noting that there were initial signs of reduction in slippages in some product categories, the rating agency said that it would monitor the trend closely. ICICI Bank had restructured assets to the tune of Rs 1,090 crore with applications for another Rs 1,990 crore pending with the bank.
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