Moody's affirms rating on SBI's bond programmes, maintains stable outlook

Moody's Investors Service has affirmed ratings on domestic as well as foreign currency bond programmes of the country's largest lender SBI, expecting its financial profile to remain stable over mid-term.

"Moody's Investors Service has affirmed State Bank of India's (SBI) local and foreign currency deposit ratings of Baa3/P-3.

"At the same time, Moody's has affirmed the Baa3 rating on the bank's senior unsecured debt (issued via its London branch) and (P)Baa3 rating on its senior unsecured medium-term note (MTN) programme," the global credit rating agency said in a press release.

Baa3 denotes the lowest rating in investment grade on a long-term corporate obligation which carries moderate risks.

The outlook on all the long-term ratings is positive.

Moody's also affirmed the baseline credit assessment (BCA) at ba1, the ratings reflect "Moody's expectation that the bank's financial profile will remain stable over the next 12-18 months."

SBI, also now among the top 50 global banks on the basis of asset size post-merger of its associate banks with itself, reflected a deterioration in its asset quality because of such amalgamation as well as due to economic disruptions in last few quarters.

At end-March 2017, SBI's gross non-performing loan (NPL) ratio, as a percentage of gross loans outstanding, increased to 9 per cent on a consolidated basis compared to 6.9 per cent on a solo basis.

At the end of June 2017, the consolidated NPL ratio increased further to 9.9 per cent.

"Moody's attributes some of the negative pressure on the bank's asset quality to the one-off effect of the merger and expects asset quality to remain broadly stable because the bank has been proactive in recognising legacy credit issues, while it has de-risked its new origination book over the last two to three years.

Moody's noted that a large proportion of bank's NPLs are under different resolution process they can improve the asset quality of the lender.