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| Fitch affirms ICICI ratings, says market disruptions can hurt |
| BS Reporter / Mumbai Nov 20, 2008, 00:46 IST |
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Ratings agency Fitch On Wednesday retained a BBB-grade on ICICI Bank’s long-term foreign currency Issuer Default Rating (IDR). The country’s second-largest lender’s individual rating and support ratings were affirmed at ‘C’ and ‘2’, respectively, although both these ratings are currently facing downward pressure.
Fitch said the individual rating might be downgraded if the bank’s asset quality deteriorates significantly. “This may put further pressure on the bank’s funding, particularly for its growing international business, where market borrowings have a relatively large share and refinancing risk has already increased steeply, possibly leading to a liquidity problem,” said the agency.
Risks on the bank’s asset quality were minimised for the time-being, partly due to the foreign currency liquidity offered by the central bank.
“The near-term challenge for ICICI Bank, however, is to overcome the shrinking funding options, particularly in foreign currencies for its international business. The bank remains vulnerable to market disruptions, given the higher proportion of wholesale funds,” said Fitch.
While the bank’s short-term foreign currency IDR was rated as F3, the support rating floor was unchanged at BBB.
“More write-downs and continued market turmoil have the potential to further impair confidence, and in an extreme situation, even damage ICICI’s deposit base in its international subsidiaries,” added Fitch.
ICICI’s asset quality has been deteriorating over the past year, particularly in the consumer loan portfolio that had grown rapidly between FY04 and FY08. Its gross non-performing loan ratio at 4 per cent at the end of September 2008 was the highest among its peer rated banks in India.
This ratio may further worsen given the slowdown in economic growth over the next year or two.
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