Fitch upgrades outlook on SBI, 9 other lenders

Rating agency Fitch on upgraded outlook of 10 financial institutionals, including SBI, ICICI Bank and EXIM Bank of India to 'stable' from 'negative' earlier following revision in the country's outlook.

"Fitch Ratings has revised 10 India-based financial institutions' outlook to Stable from Negative, while affirming their respective ratings, including their 'BBB-' Long-Term (Issuer Default Ratings (IDRs)," the agency said in a statement.

The change in the outlook on the IDRs follows the revision of the outlook on India's long-term foreign- and local-currency IDRs to 'stable' from 'negative', it said.

Among other lenders are: Punjab National Bank, Bank of Baroda, Bank of Baroda (New Zealand) Ltd (BOBNZ), Canara Bank, IDBI Bank, Axis Bank, Export-Import Bank of India and Housing and Urban Development Corporation (HUDCO).

Fitch said the revision in outlook for lenders is in line with the sovereign rating change, primarily driven by a strong propensity and ability to support the banks if needed.

"SBI, ICICI, PNB, BOB, Canara and IDBI are large domestic banks with a pan-India franchise and have a significant share of the system's assets and deposits," it said.

ICICI's and Axis's VRs (Viability Ratings) which are at 'bbb-' - the same level as the sovereign's IDRs - also support the outlook revision, due to their steadily improving standalone credit profile despite difficult market conditions, Fitch said.

"While asset quality pressures cannot be ruled out - particularly from their infrastructure exposures – strong funding and profitability coupled with robust capital position provide adequate buffer against stress," Fitch added.

It further said that government banks' stressed assets were at 11.59 per cent as of end-2012 against the sector average of 9.61 per cent.

Asset quality of certain government banks, such as PNB, has witnessed a sharp deterioration which has put their VR under pressure, it said, adding further deterioration from current levels will add further pressure which may lead to a downgrade of their VR.