AgenciesInternational rating company Moody’s upgraded and on their standalone financial performance basis, what is known as "baseline credit assessments" in market parlance, citing improvement in assets quality, profitability and capital.
On that scale, those two of the country’s top three private banks were ranked one notch up at Baa3, the lowest rank in the investment grade in line with India’s sovereign rating grade.
However, the banks’ deposit ratings were affirmed at Baa3 as those cannot rise above the country’s sovereign rating grade unless a substantial part of revenues are generated overseas.
“Their asset quality has seen a significant improvement, with both the gross and net non-performing loans (NPL) ratios declining,” Moody’s Investors Services said in a note Friday late evening.
“Credit costs have also reduced at the same time as provision coverage has increased. Lower credit costs have resulted in higher profitability,” it said.
ICICI and Axis' return on assets for the year ending March 2022 was 1.8% and 1.2% respectively, compared to an average of 0.8% and 0.4% over the four years ending March 2020.
ICICI's profitability has also benefited from rising net interest margins as the share of the low margin international business has come down in the last four years.
ICICI and Axis have raised equity capital, resulting in significantly higher capital ratios. The core equity tier 1 ratios of ICICI and Axis at end March 2022 were 17.6% and 15.2% compared with 13.6% and 11.3% in March, 2019.
Funding and liquidity, according to Moody’s remain credit strengths of the banks, with both being majority funded by retail deposits. Liquidity coverage ratios of both the banks are comfortably above the minimum prescribed regulatory levels.
However, the proposed acquisition by Axis of Citigroup India’s consumer assets will result in an approximately 230 basis points decline in capital at the bank. A basis point is 0.01 percent.
As Axis has good access to capital markets, we expect the bank to raise capital to maintain its current capital ratios,” the rating company said.
Axis Bank shares were a tad up at Rs 635.60 Friday on BSE while ICICI Bank shares rose nearly 1.5 percent to close at Rs 688.10 apiece. BSE Sensex ended at 51,360.42, down about a quarter of a percentage point.
On that scale, those two of the country’s top three private banks were ranked one notch up at Baa3, the lowest rank in the investment grade in line with India’s sovereign rating grade.
However, the banks’ deposit ratings were affirmed at Baa3 as those cannot rise above the country’s sovereign rating grade unless a substantial part of revenues are generated overseas.
“Their asset quality has seen a significant improvement, with both the gross and net non-performing loans (NPL) ratios declining,” Moody’s Investors Services said in a note Friday late evening.
“Credit costs have also reduced at the same time as provision coverage has increased. Lower credit costs have resulted in higher profitability,” it said.
ICICI and Axis' return on assets for the year ending March 2022 was 1.8% and 1.2% respectively, compared to an average of 0.8% and 0.4% over the four years ending March 2020.
ICICI's profitability has also benefited from rising net interest margins as the share of the low margin international business has come down in the last four years.
ICICI and Axis have raised equity capital, resulting in significantly higher capital ratios. The core equity tier 1 ratios of ICICI and Axis at end March 2022 were 17.6% and 15.2% compared with 13.6% and 11.3% in March, 2019.
Funding and liquidity, according to Moody’s remain credit strengths of the banks, with both being majority funded by retail deposits. Liquidity coverage ratios of both the banks are comfortably above the minimum prescribed regulatory levels.
However, the proposed acquisition by Axis of Citigroup India’s consumer assets will result in an approximately 230 basis points decline in capital at the bank. A basis point is 0.01 percent.
As Axis has good access to capital markets, we expect the bank to raise capital to maintain its current capital ratios,” the rating company said.
Axis Bank shares were a tad up at Rs 635.60 Friday on BSE while ICICI Bank shares rose nearly 1.5 percent to close at Rs 688.10 apiece. BSE Sensex ended at 51,360.42, down about a quarter of a percentage point.
now!Read More News on
(Catch all the Business News, Breaking News Events and Latest News Updates on The Economic Times.)
...moreDownload The Economic Times News App to get Daily Market Updates & Live Business News.
