Moody's cuts ICICI UK's long-term debt, deposit ratings

Global rating agency Moody's has said the long-term debt and bank deposit ratings for ICICI Bank UK, the British subsidiary of top Indian private sector lender, have been revised to a notch lower to bring it in line with the baseline credit assessment of the parent company.

While affirming the bank financial strength rating (BFSR) and a stable outlook on all ratings, Moody's said in its rating action note that the long-term bank deposit and senior unsecured debt ratings for ICICI Bank UK are being changed from Baa1 to Baa2, which is similar to the Indian parent's senior debt rating.

Moody's said that the current BFSR incorporates "a certain degree of volatility in earnings, which could potentially arise from the bank's large securities holdings".

The agency noted, however, "It takes comfort from the fact that the parent bank, as demonstrated earlier this year, has been proactive in supporting its largest overseas subsidiary by injecting an addition $100 million of tier-I equity to mitigate potential losses and maintain ICICI Bank UK's current capitalisation level."

Moody's further said that it believes "the parent also has additional flexibility for future injections if needed. In this respect, the bank has set a target to maintain a capital ratio above the FSA requirement, which we consider a key rating driver for the BFSR."

When contacted, officials at the Indian parent entity said the bank was pleased that the global agency has re-affirmed the overall BFSR for the UK subsidiary with a stable outlook on all ratings, which re-affirms the belief about robust long-term fundamentals about the bank.

The UK arm currently has a capital adequacy ratio of 18.4 per cent, much higher than the British regulatory requirement of 14 per cent, the officials added.