Moodys Retains Ba2 Rating For Icici

The institution's ratings reflect ICICI's continuing strong profitability -- despite falling interest margins-- as it transforms itself into a universal bank, the global rating agency said.

The rating has taken into account ICICI's good management, strong brand and solid franchise. It also implies the availability of government support.

However, Moody's has maintained a cautious view of the ICICI Bank's credit risk profile because of systematic factors.

At the same time, it said by reducing long term exposure to the Indian industry, the institution is improving its credit risk.

ICICI's asset diversification and credit practices have improved the credit risk profile especially over the medium term, it pointed out.

 

Capital raising exercises undertaken by ICICI periodically have reinforced, as per the rating agency, its growth and its capacity to absorb losses.

The agency has kept in mind the support the government will provide in case ICICI starts floundering but also adds," over time the readiness to do so may diminish".

ICICI is relying less and less on project finance loans to Indian industry and more on medium term loans to a broader spectrum of corporate borrowers.

By reducing the long term exposures in the Indian industry, ICICI has improved its credit risk profile, the analysts said.

Through its various diversification strategies, the franchise value of ICICI is on the rise with its primary focus on corporate finance, finance of projects in infrastructure and oil, gas and petrochemical sectors and retail finance, which ICICI has, through ICICI Bank, has entered in a big way and last but not the least, its e-commerce initiatives.

In the financial year 2000 the growth of the gross non - performing loans was 9.6 per cent, down from 30.3 per cent in 1999.

The change in the business profile perhaps put some negative pressure on ICICI's bottomline, it said. The net interest margin has fallen from 2.35 per cent from 1999 to 1.98 per cent in the year 2000.

In this year (2000) ICICI also posted an increase in the recurring earnings ration , from 2.70 per cent to 2.80 per cent. The cost income ratio came in at about 18 per cent "but is unlikely to rise substantially despite heavy investments in marketing and technology," the report said.