Ind-Ra retains ratings, outlook on SBI, BoB, UBI, Canara

Rating agency India Ratings today affirmed the long-term issuer ratings on four state-owned banks at AAA, apart from maintaining stable outlook on them.
The agency affirmed ratings of SBI, Bank of Baroda, Union Bank of India and Canara Bank.
"The ratings is driven by expectations of continued strong support from the government," it said in a report.
For SBI, it said the expected support from the government is backed by the bank's quasi-sovereign risk status and huge systemic importance. The government owned 60.18 per cent in SBI as of March 2016.
The bank has been the beneficiary of steady capital injections as it has received Rs 5,393 crore as a part of the Indradhanush programme in 2015-16.

"Although SBI's asset quality has deteriorated over the past few quarters, the bank continues to be better placed than almost all of its peers," the agency said.

The report further said in the case of a merger of SBI with its associate banks and Bhartiya Mahila Bank, the lender would receive Rs 1,000 crore in equity through BMB along with a further benefit from asset revaluation.
Asset quality along with the elevated operating expenses of the merged entity would be a key monitorable.
The agency, however, downgraded ratings of IDBI Bank's additional tier 1 bond and upper tier II subordinate debt.

"The rating downgrade of IDBI Bank reflects the weakening of the standalone profile of the bank in the last few quarters on account of falling loan growth as well as increasing credit costs," it said.
IDBI Bank reported a decline of 0.9 per cent in the loan market share in FY16. Its stressed assets to total loan ratio reached about 18 per cent in FY16 from 13.6 per cent in FY15.
"Although the bank has been making efforts towards reducing the concentration and increasing the diversity of its loan portfolio, the legacy concentrations will take time to be addressed," the report said.

IDBI will need to raise fresh equity from the capital markets by diluting some of the government's shareholding, and plan for the significant capital raising requirements under Basel III norms.
The report estimates IDBI will need Rs 15,300 crore of tier-I capital to maintain a tier-I ratio of 10 per cent by FY19.