Credit rating agency Fitch said on Sunday it had revised its outlook on State Bank of India (SBI), ICICI Bank, Axis Bank and six other lenders to “negative” from “stable”. Fitch said the ratings of all the banks are support-driven and anchored to their respective sovereign country rating. “They are based on Fitch’s assessment of high to moderate probability of extraordinary state support for these banks, which takes into account our assessment of the sovereign”s ability and propensity to provide extraordinary support,” it said in a statement. Fitch, however, affirmed the banks’ issuer default ratings, support ratings and support rating floors.
The banks are:
- State Bank of India (SBI)
- EXIM Bank
- Bank of Baroda
- Bank of Baroda (New Zealand)
- Bank of India
- Canara Bank
- Punjab National Bank (PNB)
- ICICI Bank
- Axis Bank
Fitch said State Bank of India’s issuer default rating of “BBB-” is reflects its expectation that the lender is highly likely to receive extraordinary state support, if required, due to its very high systemic importance.
“SBI is the largest Indian bank with nearly 25 per cent market share in system assets and deposits, it is 57.9 per cent state-owned and has a much broader policy role than peers,” the agency said.
Fitch said it has a rating of “BB+” each on ICICI Bank and Axis Bank, and expects “a moderate probability of extraordinary state support for these banks, due to their systemic importance, market position and private ownership”.
The probability of extraordinary state support for the two large private banks will be lower compared to large state banks, it added.
Fitch also said its “negative” outlook on the country’s sovereign rating reflects an increasing strain on the state’s ability to provide extraordinary support due to limited fiscal space and the significant deterioration in fiscal metrics due to challenges from the COVID-19 pandemic.
Last week, the ratings agency had revised its outlook on India to “negative” from “stable”, citing the impact of the escalating coronavirus pandemic on the country’s economy.