S&P downgrades ICICI Bank's standalone credit profile

Gobal rating agency Standard & Poor's has lowered private lender ICICI Bank's standalone credit profile (SACP) to 'bbb-' from 'bbb' on weakening asset quality.

The bank's asset quality will remain under pressure over the next 12 months.

The agency affirmed 'BBB-' long-term and 'A-3' short-term foreign currency issuer credit ratings for ICICI Bank. The outlook for the long-term rating is stable.

Referring to lowering of SACP, S&P said it had revised the assessment of ICICI Bank's risk position to moderate from adequate.  

ICICI Bank's credit costs are expected to remain high because of continued pressure on asset quality, given the tough operating conditions for capital-intensive corporate sectors in India.

About 53 per cent of the bank's loans on a standalone basis are to the corporate and small and midsize enterprises.

The rising stress in these exposures has led to an increase in the bank's consolidated gross nonperforming loan (NPL) ratio to 5.7 per cent in June 2016, from 3.8 per cent in March 2015.

S&P said it expected ICICI Bank to maintain its strong business position supported by its good business diversity, and its satisfactory capitalisation and funding, despite weakening asset quality.

The bank's net standard restructured loans of Rs 7,200 crore may also contribute to the rise in NPLs.

ICICI Bank's earnings (profits) are expected to remain well above the sectoral average despite elevated credit costs. This was because of the bank's competitive net interest margins, sizable fee income, and low cost-to-income ratio, it added.