Mumbai: Global rating agency Fitch Ratings on Monday downgraded ICICI Bank and Axis Bank’s Long-Term Issuer Default Rating (IDR) from “BBB-“ to “BB+” and Viability Rating from “bbb-“ to “bb+”. The Outlook on the IDR is Stable. The agency, however, affirmed both the banks Support Rating and Support Rating Floor at '3' and 'BB+', respectively.
BB rating indicates speculative grade and BBB poi-nts to good credit quality.
The rating action on the two private banks comes after Fitch lowered its midpoint for India's operating environment to 'bb+' from 'bbb-' following a review of the banking sector's performance, particularly in the last three years, and the regulatory framework, as well as the outlook in the near-term.
“We also compared India with other sovereign jurisdictions in Asia rated in the 'BBB' category including the key metrics of GDP per capita and the ease-of-doing-business ranking. We concluded the sector will perform below the average of its peers over the next one to two years.”
Fitch further said ICICI Bank's core capitalisation is higher than most other Indian banks’ but within the current operating environment poses only a moderate buffer against risks.
About Axis Bank, the rating agency said that the downgrade of its Viability Rating reflects its relatively weak core capitalisation and asset quality.
Fitch believes that Axis's core capital ratio is unlikely to meet the threshold for higher-rated banks even if the bank proceeds with the conversion of $ 400 million of warrants into equity....