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Informist, Thursday, Sep 12, 2024

--SBI: S&P affirms credit rating at 'BBB-', outlook positive 

MUMBAI – S&P Global Ratings has affirmed the long-term and short-term issuer credit ratings of State Bank of India at 'BBB-' and 'A-3', respectively, with a positive outlook, the bank informed the exchanges today. The rating agency has also affirmed the bank's standalone credit profile at 'bbb'.

"The positive rating outlook on SBI reflects that on the sovereign," the rating agency said. "The ratings on SBI is capped by our sovereign credit ratings on India and will therefore move in tandem with those on the sovereign." S&P had revised the outlook on India to positive from stable in May, while affirming the sovereign credit rating at 'BBB-'.

The rating agency expects SBI to maintain its market leadership with India's robust economic growth supporting its loan growth, asset quality, and profitability. The bank's strong deposit franchise is also factored into its credit standing. S&P Global forecasted the bank's non-performing assets to remain at 2.5-3.0% of total loans over the next 12-18 months compared to 3.0% as of Mar 31, with credit costs under 1%, according to the report attached with the filing.

According to S&P, the bank's risk-adjusted capital ratio is expected to be lower at 5.5-6.0% over the next two years compared to 5.9% as of Mar 31. SBI's capitalisation remains lower than that of large private banks in India, S&P said.

"The bank benefits from revenue contributions from its insurance, cards, and brokerage subsidiaries. Growth in its overseas loans will likely stay in line with India's trade performance and global demand. SBI's overseas book accounted for a sizeable 14% of its total loans, with a significant portion provided to India-based companies," S&P said in the report.

The rating agency also said that it expects the bank to report weaker earnings than Indian private sector banks and international peers. This view is in the wake of lower profitability of the bank due to its structurally lower margins and cost efficiency. "The bank could gradually improve its operating efficiency over the next three years as it exploits its digital platforms," it said.

For the June quarter, SBI reported a net profit of 170.35 bln rupees on total income of 1.23 trln rupees. Its net interest income was at 411.25 bln.

Today, shares of the bank closed 2.5% higher at 787.75 rupees on the National Stock Exchange.  End

Reported by Christina Titus 

Edited by Ashish Shirke

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