Moody’s Upgrades Deposit Ratings on SBI and Three Other PSU Banks; Key Details to Know

SBI share today: Moody’s Investors Service on Friday affirmed the long-term deposit rating of State Bank of India (SBI) upgraded it from Baa1 to Baa3 for Punjab National Bank, Canara Bank and Bank of Baroda on Baa3 and on improvement in credit profile. The long-term ratings of all the four banks remain stable, the report said.

While Ba1 speculative grade is the highest rating of Moody’s long-term corporate liability ratings, Baa 3 is the lowest. Liabilities with Baa3 rating are subject to moderate credit risk. Ba1 rated obligations are assessed to have speculative elements and are subject to substantial credit risk.

Affirmation of SBI’s Long Term Deposit Rating at Baa3 and Upgradation of Long Term Deposit Ratings of BOB, Canara and PNB from Baa1 to Baa3 Reflects Improvement in India’s Macro Profile from Moderate+ to Moderate+ Credit Metrics of Four Banks reforms and Moody’s continued assumption of a very high level of government support to banks in times of need,” Moody’s said in a statement.

Bank deposit ratings by Moody’s indicate a bank’s ability to service its foreign and domestic currency deposit obligations on time. Shares of SBI were trading at Rs 595.40, up 0.93 per cent, on the BSE. Shares of Canara Bank were trading at Rs 324.40, up 1.3 per cent. Bank of Baroda was trading up 1.8 per cent at Rs 181 and PNB up 1.2 per cent at Rs 57.90 on the BSE.

Moody’s said credit conditions in India have gradually improved, with retail loans performing well and the financial health of corporates improving after a decade of deleveraging. Nevertheless, loans to small and medium-sized enterprises continue to pose a risk to banks’ asset quality as Moody’s expects this segment to be most vulnerable to interest rate hikes.

“While India’s economic growth will be driven by rising rates and the global slowdown, the Indian economy will outperform its emerging market peers. Owing to these factors, the operating environment remains supportive for banks,” Moody’s said.

Moody’s expects banks’ asset quality to improve over the next 12-18 months, supported by a supportive operating environment, healthy corporate balance sheets and improved retail underwriting quality. Improvement in asset quality has translated into higher profitability due to lower credit cost. Moody’s expects this growth in profits to be sustainable over the next 12-18 months.

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