India Ratings Assigns Axis Bank's INR20bn Basel-III Tier-2 Bonds 'IND AAA'/Stable

India Ratings and Research (Ind-Ra) has assigned Axis Bank's (ABL) INR20bn Basel-III compliant Tier-2 bonds an 'IND AAA' rating with a Stable Outlook. This takes the total amount of Ind-Ra rated Basel-III compliant Tier-2 bonds for the bank to INR50bn. A full list of outstanding ratings is at the end of the commentary.

KEY RATING DRIVERS

The bond rating has been equated to ABL's Long-Term Issuer Rating (according to Ind-Ra's rating criteria) which reflects the bank's diverse earnings profile and robust profitability, which are strong enough to absorb credit shocks even in a stress case situation. ABL's comfortable capital buffers should be adequate to support its medium-term growth plans. The bank's retail liability-focussed growth strategy has helped improve its funding profile along with boosting the fee income stream. While ABL's operating and capital buffers measure up to its 'AAA' peers (private banks), its high exposure to infrastructure project loans and highly levered corporate groups makes it more vulnerable to impairment in asset quality than a few of its peers with a higher mix of granular assets.

RATING SENSITIVITIES

The Outlook on ABL's Long-Term Issuer Rating as well as the instrument rating could be revised to Negative if there is significantly more than expected deterioration in asset quality, particularly if accompanied by higher-than-expected loan growth which could dilute the capital buffers and impair the funding profile.

ABL's ratings (including the above) are as follows:

- Long-Term Issuer Rating: 'IND AAA'; Outlook Stable

- Short-Term Issuer Rating: 'IND A1+'

- INR37bn lower Tier-2 subordinated debt: 'IND AAA'; Outlook Stable

- INR50bn Basel-III compliant Tier 2 bonds (increased from INR30bn): 'IND AAA'; Outlook Stable

- INR3.07bn upper Tier-2 subordinated debt: 'IND AA+'; Outlook Stable

- INR35bn Basel III AT1 bonds: 'IND AA+'; Outlook Stable

Powered by Capital Market - Live News