S&P Global Ratings today affirmed its ratings on Kotak Mahindra Bank with a stable outlook on its strong capitalisation and risk management, but ruled out any upgrade in the next one to two years.
S&P has a 'BBB-' long-term rating on Kotak Mahindra Bank with a stable outlook.
The rating also reflects the bank's increased size and reach following its acquisition of ING Vysya bank in 2015. However, Kotak Bank's below-average funding profile moderates these strengths, it said.
"We affirmed the rating on Kotak Mahindra Bank to reflect the bank's strong capitalisation and risk management," S&P Global Ratings Credit Analyst Nikita Anand said.
S&P said it expects Kotak Bank's capitalisation to remain strong over the next 12-18 months, adding that its core earnings are strong and support internal accruals.
"We expect Kotak Mahindra Bank's margins and return on average assets to remain stronger than the industry average over the next 12-18 months," it said.
S&P expects the bank's asset quality and credit costs to remain under pressure at least over the next year due to the tough operating conditions for corporate sector in India, but it would remain better than the industry average.
The stable outlook reflects that the bank will maintain the strength of its capital and risk management over the next 12-24 months, despite some deterioration in its capitalisation.
"An upgrade of the bank in the next one to two years is unlikely," it said.
S&P also affirmed 'BBB-' long-term ratings on the bank's core subsidiary, Kotak Mahindra Prime, an auto finance company.
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