Moody's assigns B1(hyb) Axis Bank's proposed AT1 capital securities

Axis Bank said that credit rating agency Moody's Investors Service has assigned B1(hyb) rating on the bank's proposed USD-denominated, undated, non-cumulative and subordinated Additional Tier-1 (AT-1) capital securities.

The AT-1 capital securities are being issued out of the bank's Global Medium-Term Note (GMTN) programme. Moody's Investors Service has also assigned (P)B1 Pref. Stock Non-cumulative program rating to the AT-1 capital securities component of its GMTN programme.

Moody's Investors Service said that the B1(hyb) rating and (P)B1 program rating is three notches below Axis Bank Ltd's ba1 baseline credit assessment (BCA) and adjusted BCA, reflecting the probability of impairment associated with non-cumulative coupon suspension, as well as the likelihood of high loss severity when the bank reaches the point of non-viability.

An upgrade or a downgrade of the bank's BCA will lead to a corresponding change in the ratings of the AT1 securities.

Axis Bank's BCA could be upgraded if there is an improvement in asset quality, as reflected in the bank being able to maintain credit costs below its long-run average.

Axis' BCA could be downgraded if there is a significant weakening in its asset quality, with negative implications on capital and profitability, or if funding weakens as reflected by a deterioration in retail deposits.

Yesterday, Axis Bank said that it has initiated the process of issuing of the debt instruments, in the form of the Additional Tier-1 (AT-1) Notes in foreign currency.

On 27 April 2021, the board of Axis Bank had authorized the bank to borrow/raise funds in Indian currency/foreign currency by issue of debt Instruments including but not limited to long term bonds, non-convertible debentures, perpetual debt instruments, AT-1 bonds, infrastructure bonds and Tier-II capital bonds or such other debt securities as may be permitted under the guidelines issued by the Reserve Bank of India, from time to time, up to an amount of Rs 35,000 crore in domestic and overseas markets, in one or more tranches.

The resolution for the same was passed by the bank's shareholders at its 27th annual general meeting (AGM) held on 30 July 2021.

Axis Bank is a private sector bank offers the entire spectrum of financial services to customer segments covering large and mid-corporates, MSME, agriculture and retail businesses. As on 30 June 2021, the bank had a network of 4,528 domestic branches and extension counters situated in 2,559 centres.

The private sector bank reported a 94.2% jump in standalone net profit to Rs 2,160 crore on a 2.4% rise in total income to Rs 19,591 crore in Q1 FY22 over Q1 FY21.

The scrip rose 0.40% to currently trade at Rs 786.90 on the BSE.

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