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| Crisil gives -ve outlook to ICICI bonds, reaffirms rating |
| BS Reporter / Mumbai Jul 16, 2009, 14:42 IST |
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 Rating agency Crisil has lowered the outlook on two of ICICI Bank’s bonds to negative from stable, while reaffirming the AAA rating for the financial services giant.
The bonds on which the outlook was changed 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.
“Crisil expects ICICI Bank’s core profitability to remain constrained over the near term because of tightening fee income and higher levels of provisioning…The success of the bank’s continuing measures to reduce operating expenses and offset the costs of additional branches will be a key monitorable for the ratings in 2009-10,” the rating agency said in a statement today.
In an e-mail, ICICI Bank Executive Director and CFO N S Kannan said, “Crisil has reaffirmed its AAA rating on our debt instruments and have 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 retail unsecured loans — are already being addressed by us through these strategies and we are confident of achieving our goals in these areas.”
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 was earlier expected, as a result of which the bank’s overall NPA levels increased somewhat more in 2008-09 than Crisil had earlier projected; Crisil expects the NPAs to continue to rise in the near term,” Crisil said.
While noting that there were initial sings of reduction in slippages in some product categories, the rating agency said that it would monitor the trends closely. It also said that the economic environment, which had resulted in loan restructuring, could increase further.
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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