ICICI Bank will maintain its strong market position and market capitalisation over the next 12-18 months, S&P Global Ratings said on Monday, and affirmed its long-term issuer credit rating ‘BBB-‘ with a stable outlook. The global ratings firm said the private sector lender is likely to sustain improvements in asset quality, supported by India’s financial restoration and improved danger administration. S&P Global Ratings at this time affirmed its ‘BBB-‘ long-term and ‘A-3’ short-term issuer credit score rankings on ICICI, it stated in a launch.
“At the same time, we affirmed our ‘BBB-‘ long-term issue rating on the bank’s senior unsecured notes,” S&P Global Ratings stated. On the steady outlook, it stated ICICI will keep a powerful market place within the Indian banking sector. “We expect the bank’s asset quality to remain better than the Indian sector average and comparable to that of similarly rated international peers. The bank should maintain good capitalisation over the next 12-18 months, supported by healthy earnings. The ratings firm said that the bank has adequate capital buffers to support its above-average growth. It also estimated that the Risk-Adjusted Capital (RAC) ratio of ICICI Bank will dip marginally below 10 per cent due to strong credit growth from 10.4 per cent as of March 31, 2022.”
Despite the decline, its capitalisation is more likely to stay higher than most Indian friends. The decline will replicate credit score progress of 17-20 per cent that we anticipate amid a powerful financial restoration. Although returns on belongings are more likely to be wholesome at 1.8-1.9 per cent, they’d not be enough to maintain a RAC ratio above 10 per cent. “ICICI’s earnings can get some uplift from stake sales in subsidiaries. That said, the timing and quantity of profits from such sales are uncertain,” S&P Global Ratings stated. On asset high quality entrance, it stated financial institution’s asset high quality is probably going to enhance regardless of an uneven financial restoration in India and macroeconomic challenges. “In our base case, the bank’s weak loans, defined as Non-Performing Loans (NPLs) and restructured loans, will decline to 3.0-3.5 per cent of total loans over the next 12 months, from about 4.6 per cent as of March 31, 2022. Broadly stable credit conditions will support this. Credit costs should remain at about 1 per cent over the next 12-18 months,” it stated.
ICICI’s asset high quality ought to stay higher than the Indian sector common, this follows gradual enhancements over the previous few years. ICICI has largely offered for legacy weak loans, whereas pandemic-related weak loans have additionally been manageable. Tighter danger administration, together with bettering working circumstances in India, ought to assist it maintain the decline in its credit score prices and weak loans, the worldwide ranking company stated. On the affect of upper inflation and rising rates of interest, S&P Global Ratings stated it needs to be manageable. ICICI’s higher buyer profile and underwriting relative to the Indian banking sector will doubtless restrict losses from the spillover affect of geopolitical tensions. Retail loans kind about 53 per cent of the financial institution’s mortgage portfolio. These are effectively diversified amongst residence loans, car loans, and unsecured loans, together with private loans and bank cards.
As a sizeable portion of ICICI Bank’s retail loans are to comparatively low-risk residence loans, and inside residence loans a sizeable portion is to salaried professionals who’ve low loan-to-value ratios, it gives a cushion in opposition to larger rates of interest and decrease disposable revenue on account of inflation. On the flip aspect, it stated: “We could lower the ratings on ICICI if its asset quality deteriorates, reversing the improvements over the last 12-18 months. This could happen if the economic recovery in India derails, resulting in asset quality pain for the bank or if the bank’s above-average credit growth results in higher latent risk.”
Source: www.financialexpress.com”